Post-SECURE: can surviving spouse take as bene, wait 10 years and then assume?

Submitted by Robert Vashko on Mon, 2021-03-29 02:26

I’ve been hearing a lot of chatter about a post-SECURE IRA strategy whereby a surviving spouse could take the inherited account as a bene, defer for almost 10 years, then spousally assume.

Looking at SECURE’s additions to 401(a)(9), I’m not sure that option is clearly on the table? (B)(iii) – which is to be used in the cased of EDBs like a surviving spouse – states that the employee’s interest *WILL* be distributed over that beneficiary’s life expectancy. Not “can” or “may,” but “will.”

In other words, I am not sure SECURE makes it clear that a SS EDB has the option of taking the out-in-10 at all. Granted, the SS as bene can still delay RMDs until the employee/decedent would have turned 72 anyway. But is there any clear providence in the “new” 401(a)(9) that would allow a SS EDB to take the out-in-10 and then “flip” to spousal assumption right before the 10-year window closes?



Submitted by Alan - IRA critic on Mon, 2021-03-29 16:03

Secure does not appear to provide an option for an EDB to select the 10 year rule, although the IRS could possibly allow the spouse and perhaps even other non spouse beneficiaries to select the 10 year rule. The difference between this and the former 5 year rule for designated beneficiaries is that the former option only applied to deaths prior to RBD. Since Secure applies the 10 year rule regardless of owner’s age at death, such an IRS ruling could result in additional deferral of RMDs for beneficiaries of owners passing at advanced ages, and this runs counter to the intent of the Act. Will have to wait and see what the IRS does, but at this point I would bet against providing the 10 year option to EDBs.

Submitted by Robert Vashko on Mon, 2021-03-29 22:15

Thank you, sir.

Submitted by Alan - IRA critic on Tue, 2021-04-06 03:11

Update: The new Pub 590 B allows an EDB to elect the 10 year rule, but only if the owner passed prior to the RBD. The following is copied from the Pub:
“Individual designated beneficiaries. The terms of most IRA plans require individual designated beneficiaries, who are eligible designated beneficiaries, to take required minimum distributions using the life expectancy rules (explained later) unless such beneficiaries elect to take distributions using the 5-year rule or the 10-year rule, whichever rule applies. The deadline for making this election is December 31 of the year the beneficiary must take the first required distribution using his or her life expectancy (or December 31 of the year containing the 5th anniversary (or 10th anniversary for the 10-year rule) of the owner’s death, if earlier). ”
Guess the Pub writers know what is going to be in the Secure Act RMD Regs. Under these provisions a surviving spouse of a spouse that passed prior to RBD could elect the 10 year rule, avoid RMDs until year 10, then elect ownership in the 10th year. In addition a sole spouse beneficiary can also delay LE RMDs until the year spouse would have reached 72 and in some cases this might be preferable to electing the 10 year rule.

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