Can an EDB opt out of lifetime stretch in favor of out-in-10?
Suppose an EDB (for whatever reason) did not want to take their inheritance and would prefer SECURE’s out-in-10 payout instead. Maybe they had some reason for taking no income for the first nine years. Even though they are eligible for the lifetime stretch, can they opt for the out-in-10 instead?
The language of 401(a)(9)(B)(iii) states that the money *will* be distributed over the life of such designated beneficiary”. “Will” (vs. “may” or “can”) seems pretty cut and dried.
But I wonder if that was the intent? Did Congress simply not think about the possibility that someone would ever opt for out-in-10 over a lifetime stretch, or did they truly have some interest in preventing an EDB from doing so?
I mean, out-in-10 is a revenue play. You’d think the fed gov’t would have no problem with someone wanting to give them revenue faster than required.
I think I asked this question a ways back, but at the time, the answer was “it’s unclear”. Wondering if it’s any clearer now? My searches are still not coming up with anything that speaks to the issue.
Please and thanks,
Permalink Submitted by Alan - IRA critic on Wed, 2020-12-09 02:54
The Secure Act wording does not suggest there is any option out of LE and into the 10 year rule for an EDB. Probably an EDB would more likely be able to use the LE of the decedent if the EDB is older, since DBs used to have this option for deaths after the RBD in the past. That is less of a stretch than thinking the IRS might allow an opt in to the 10 year rule. The IRS Secure Act Regs have been pushed to the back burner due to Covid and CARES, and I think that the top trust attorneys are keeping the IRS busy addressing the impact of Secure on trust beneficiaries.