SECURE – Successor beneficiary
I read somewhere (can’t remember the publication) that new 10-year payout impacts successors beneficiaries too.
For example, lets say an “eligible designated beneficiary” inherits an IRA post 2020 and is taking payouts based on his/here life expectancy. Under the prior rules (pre 2020) the successor beneficiary could continue the stretch using the original (first) beneficiaries remaining life expectancy
Post SECURE – would the 2nd generation beneficiary now be subject to maximum payout of 10 years? could they continue using the life expectancy of the original beneficiary?
Does is matter if the 2nd beneficiaries is an “eligible” beneficiary?
All guidance is appreciated.
Permalink Submitted by David Mertz on Thu, 2020-01-02 15:01
Permalink Submitted by ShipsnGiggles on Thu, 2020-01-02 17:10
bene inheriting when the original benficiaries remaining life expectancy is less than 10 years? Would the 10 year still apply? or the remaining life expectancy (of the now deceased original bene)?
Permalink Submitted by David Mertz on Thu, 2020-01-02 20:51
The successor beneficiary to an eligible designated beneficiary gets 10 years to complete the distribution regardless of the remaining life expectancy of the eligible designated beneficiary. Although the statute doesn’t say it, I assume that the IRS will implement this as requiring the distribution to be completed by the end of the 10th year following the year of the eligible designated beneficiary’s death, not within 10 years from the actual date of death, since only the cumulative total of distributions is reported for any given year, not the actual dates of distributions.
Permalink Submitted by Alan - IRA critic on Thu, 2020-01-02 22:27
Note that Sec 401(b)(5) also applies the 10 year rule to successor beneficiaries of current designated beneficiaries who inherited before the effective date, but pass after the effective date.