Common use of Required Minimum Distribution Clause in Contracts

Required Minimum Distribution. Traditional IRAs are subject to IRS required minimum distribution (“RMD”) rules starting when the Account Holder attains age 70½. The initial distribution from the Account must begin no later than April 1st following the calendar year in which the Account Holder attains age 70 1/2 (referred to as the “required beginning date”). Subsequent distributions must be withdrawn from the Account by December 31st of each year. Pursuant to IRS regulation, failure by the Account Holder to withdraw the required distribution amount will result in an additional tax of 50% of the amount that should have been withdrawn in any given year. This penalty is in addition to ordinary income taxes the Account Holder must pay to the federal and, if applicable, state government. To calculate the required distribution amount, the Account Holder will divide the prior December 31st balance of the Account by a life expectancy factor found in the uniform lifetime table (see Regulation section 1.401(a)(9)‐9). In the event the Account ▇▇▇▇▇▇’s spouse is the sole beneficiary of the Account and he or she is more than 10 years younger than the Account Holder, the required distribution amount is determined using the joint and last survivor table which may also be found in the Regulation section referenced above. If the Account Holder has more than one Traditional IRA, he or she must calculate the RMD separately for each account. However, there is no requirement for the Account Holder to withdraw the RMD amount from each account. As a result, the Account Holder may satisfy his or her distribution requirement by taking from one account an amount sufficient to cover both accounts. The Custodian is under no obligation to determine whether the Account Holder fulfills his or her requirement to take the required distribution amount from the Account each year and, pursuant to its policies, will not make payment until authorization is received. The only exception to this policy will be in situations where the Account has been determined by the Custodian to be abandoned. If the Custodian’s efforts to locate the Account Holder prove unsuccessful, it may be required to escheat Account assets under state abandoned property laws. The Account Holder hereby releases and holds the Custodian harmless from any loss, penalty, or tax related to his or her failure to take a required minimum distribution or in the event the Account is abandoned.