Disabled eligible designated beneficiary under SECURE
Suppose Dad leaves you his IRA, and you meet either the chronically ill or the disabled criteria to qualify as an eligible designated beneficiary under SECURE, and you implement a life-expectancy stretch.
Then suppose your disability, once thought to be of indefinite duration, eventually improves over time whereby you no longer qualify as “disabled” under the IRS definition. Are you supposed to switch your stretch payments to out-in-10, similar to how a minor child must flip to out-in-10 upon reaching the age of majority?
I have no idea if the IRS periodically reviews claims of disability like SSA does, or if it’s a one-time hurdle whereby “once you’re in, you’re in” and even if your disability improves, you can keep the life-expectancy stretch.
Permalink Submitted by Alan - IRA critic on Tue, 2020-01-14 04:44
There is nothing in the Secure Act that suggests beneficiary changes post the DOD determination date will change the eligible beneficiary status other than when a minor child reaches the age of majority. It is also the general consensus that if a beneficiary is healthy on the DOD but suffers a crippling injury the following week that they will be able to avoid the 10 year rule. Your posted scenario is a great example of a win-win for the beneficiary – their health improves and they still get the LE stretch. I would expect the same results if a SSD beneficiary award was later terminated as long as it was not denied retroactively for application fraud, etc. It will be interesting to review the certification form fine print to be filed for chronically ill individuals.
Permalink Submitted by Robert Vashko on Tue, 2020-01-14 10:33
Thanks. Yes, my thought is that situations like my hypothetical are (unfortunately) pretty rare, or at least rare enough whereby Congress either a.) didn’t think of it; or b.) didn’t think it was a hair worth splitting.Thanks again!