More specifically, when an individual inherits a retirement account from the original owner, they become a beneficiary. Example #4a: On March 1, 2020, Ann, age 45, inherited an IRA from her spouse of the same age. Overwhelmed with debt? Jeffrey Levine, CPA/PFS, CFP®, CWS®, MSA is the Director of Advisor Education for Kitces.com, the Director of Advanced Planning at Buckingham Wealth Partners (where he works closely with their team to create a seamless client experience that makes it easy to plan and instill confidence as they work towards their most important goals), and the Lead Creator and Content Expert for Savvy IRA Planning®, offered through Horsesmouth. The 10-Year Rule of the SECURE Act shortens the time period during which most post-SECURE Act non-spouse beneficiaries have to distribute assets from their inherited retirement account. It is absolutely clear that a surviving spouse who remains the beneficiary of a retirement account will not have to take RMDs from the inherited account until the deceased spouse would have been 72 if that spouse died after the SECURE Act’s effective date. In analyzing the rules for Successor Beneficiaries in the post-SECURE Act world, there are three scenarios that must be considered for Successor Beneficiaries. The reference to “clause (ii)” in the excerpt from the SECURE Act above refers to the section of the SECURE Act that creates Eligible Designated Beneficiaries. However, if you marry after your pension begins, you may be able to name your new spouse as a pension beneficiary under certain conditions. “A minor child who inherits a retirement account from a parent must begin taking the RMDs over the child’s lifetime, but only until the child reaches the age of majority,” McGovern said. Contact them at Tillem McNichol & Brown, 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the internet at www.lentillem.com. Nevertheless, whether it be from a pre-SECURE Act Designated Beneficiary ‘stretching’ distributions, a post-SECURE Act Eligible Designated Beneficiary ‘stretching’ distributions, or a post-SECURE Act Non-Eligible Designated Beneficiary who dies prior to the end of the 10-Year Rule, a nontrivial number of Successor Beneficiaries will continue to inherit the remaining balance of retirement dollars from the original beneficiary… and will need guidance from their advisors as to how to timely distribute those assets. Oscar names Max as the beneficiary of the inherited IRA. The SECURE Act, however, also created a new category of beneficiaries – Eligible Designated Beneficiaries – that is still permitted to use the ‘stretch’ provision. By contrast, any Successor Beneficiary of a Post-SECURE Act beneficiary subject to the 10-Year Rule will step into the post-SECURE Act beneficiary’s shoes and will have to empty the account by the end of the 10th year following the original account owner’s death (rather than receiving their own new 10-Year Rule). Want more personal finance news? With a defined-benefit plan, the main factor to consider is whether the member was retired at their death. For instance, using the ‘stretch’ method, an IRA beneficiary turning 49 years old in the year of the IRA owner’s death needed to begin taking required minimum distributions the following year, in which they turn 50. Thus, while a surviving spouse who chooses to remain a beneficiary (often because they are under the age of 59 ½ and want to continue to maintain penalty-free access to the inherited funds) is treated as an Eligible Designated Beneficiary under the SECURE Act for as long as they live, if they die before required minimum distributions ‘kick in’ on the inherited account (beginning in the year that the original decedent would have turned 72 for deaths occurring after the SECURE Act), IRC Section 401(a)(9)(B)(iv)(II) will treat them as though they were the owner of the account at the time of their passing.
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