The rules for Successor Beneficiaries of pre-SECURE Act Designated Beneficiaries will be rather straightforward for advisors who understand the rules for Successor Beneficiaries of post-SECURE Act Eligible Designated Beneficiaries (as discussed above in Scenario #1).] Given Helena’s age, she chose to remain a beneficiary of the inherited IRA to allow her penalty-free access to its funds. Thus, such a beneficiary’s first required minimum distribution would be less than 3% (100 ÷ 34.2 equals 2.92%), and distributions from the account could be ‘stretched’ for as many as 34.2 years! Rather, there are significant impacts to both the initial beneficiaries of retirement accounts, as well as Successor Beneficiaries of the same accounts. A copy of the employee’s death certificate and a copy of the certificate of the marriage to the widow or widower should be attached to Forms SF 2800 or SF 3104. Retirement accounts were created to provide investment vehicles for individuals so that after they have stopped working, they could access their funds to cover expenses. This column presents guidance for surviving family members of deceased federal employees (those employees who die while still in federal service) and deceased annuitants (retired employees who die after retiring from federal service) about what tasks have to be performed to receive survivor benefits. Retrieved from, You will need Adobe Reader to view the PDF. For scenario 3, Successor Beneficiaries who inherit from post-SECURE Act Non-Eligible Designated Beneficiaries are, like other Successor Beneficiaries, subject to the 10-Year Rule; however, unlike other Success Beneficiaries, they will not have their ‘own’ 10-Year timeframe. Publication 554, Tax Guide for Seniors The surviving spouse would be able to withdraw funds without incurring the 10 percent early withdrawal penalty. One exception to this is if the post-SECURE Act Eligible Designated Beneficiary (or pre-SECURE Act Designated Beneficiary) is the surviving spouse of the original account owner and dies before the decedent would have been required to begin taking RMDs. According to IRS rules, he or she can: A surviving spouse can designate himself or herself as the account owner. The SECURE Act, however, also created a new category of beneficiaries – Eligible Designated Beneficiaries – that is still permitted to use the ‘stretch’ provision. Prior to the passage of the SECURE Act, the default rule for Designated Beneficiaries (living people, as well as qualifying See-Through Trusts) of a deceased individual’s retirement account was that such beneficiaries would be able to ‘stretch’ distributions over their life expectancy. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. I understand I do not have to consent to receive or purchase goods or services. They do, however, include any increases to your pension made from your retirement date to your date of death. Publication 575, Pension and Annuity Income 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). Example #1: Jamie inherited an IRA from her father in 2003, having been named the original beneficiary by her father. McGovern offered this example. Join our mailing list for monthly tips on ways to manage your finances!
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