Prior to the passage of the SECURE Act, Designated Beneficiaries of retirement accounts were allowed to ‘stretch’ Required Minimum Distributions (RMDs) from the account over their own life expectancies. Accordingly, if a surviving spouse with an inherited IRA, 401(k), or other retirement account dies before the year in which the original post-SECURE-Act decedent would have been 72, they will be treated as though they were the original owner upon their death. The question is how do these beneficiaries obtain these benefits in the most timely and efficient way. Inheriting an IRA from a Spouse? Note to readers: if you purchase something through one of our affiliate links we may earn a commission. In order to avert an immediate tax obligation, a surviving spouse could roll over the account into his or her own IRA or other retirement plan. While Successor Beneficiaries who inherit accounts from beneficiaries taking RMDs using the ‘stretch’ provision will get the 10-Year Rule (from scratch), some Successor Beneficiaries (i.e., post-SECURE Act beneficiaries of Non-Eligible Designated Beneficiaries) will ‘only’ be able to step into the initial beneficiary’s shoes, and will have to empty the balance of the IRA by the end of the 10-year period established by the original 10-year rule (i.e., the Non-Eligible Designated Beneficiary’s 10-year window). With the Baby Boomer generation continuing to age, it is likely that the number of Successor Beneficiaries will continue to rise in the coming years. The amount that the beneficiary can exclude is equal to the deceased employee's investment in the contract (cost). Alternatively, if Steve dies first, then Oscar inherits the account, and Austin no longer is on the list of Steve’s beneficiaries (as his role as Contingent beneficiary is now a moot point). SF 2800 or SF 3104/SF 3104B and the death cerificate should be mailed to the Human Resources or Personnel Office servicing the agency where the deceased was last employed. SF 2808 (Designation of Beneficiary, CSRS). Put differently, it is not possible to be an Eligible Designated Beneficiary of an Eligible Designated Beneficiary… because “any beneficiary” of an eligible designated beneficiary must distribute the inherited assets “within 10 years after the death.”. They’ll put a hold on distributing the policy so that she and her husband’s parents can work it out. Thus, a non-spouse beneficiary can choose to wait until the 10 years have passed, or can take distributions of any amount in any year along the way, whether to meet income needs or to reduce overall taxes. This means that the beneficiary cannot make any contributions to the IRA or roll over any amounts into or out of the inherited IRA. Maxine, therefore, became the Successor Beneficiary of the account. Suppose now that Helena dies in 2030, at the age of 58, and leaves her inherited IRA to her 53-year-old sister, Ava. Successor Beneficiaries of post-SECURE Act Eligible Designated Beneficiaries, Successor Beneficiaries of pre-SECURE Act Designated Beneficiaries, Successor Beneficiaries of post-SECURE Act Non-Eligible Designated Beneficiaries. More specifically, IRC Section 401(a)(9)(B)(iv)(II) states that “if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall be applied as if the surviving spouse were the employee.”. If you die after you retire. Internal Revenue Service. At some point, of course, Abbott, himself, will pass away. If the inherited traditional IRA is from anyone other than a deceased spouse, the beneficiary cannot treat it as his or her own. Again, it’s best that the plan’s sponsor, a financial expert and a tax expert be consulted before any decisions are made.
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