Successor beneficiary

When the original payout deadline continues

For an IRA or individual account under a defined contribution plan subject to the SECURE Act payout rules, succession after a designated beneficiary who was not an eligible designated beneficiary does not restart the payout period.

The remaining interest must be distributed by the end of the calendar year containing the tenth anniversary of the original owner's death. Applicable annual distributions also continue, as explained below.

When the beneficiary's death starts a payout period

For an IRA or individual account under a defined contribution plan subject to those rules, an eligible designated beneficiary's death during life expectancy payments generally starts a ten year successor payout period.

Full distribution is due by the end of the calendar year containing the tenth anniversary of that beneficiary's death, subject to any earlier applicable deadline.

A child's existing deadline following majority is not extended by the child's later death. Multiple beneficiary rules can modify the calculation, and the sole spouse exception below must also be considered.

Eligible status alone does not establish the payout method after an owner dies before the required beginning date. A defined contribution plan may require the ten year rule instead of life expectancy payments.

A permitted payout election becomes irrevocable on its final election date and binds subsequent beneficiaries for all subsequent calendar years.

Annual distributions during the remaining period

A successor must continue applicable annual required minimum distributions, or RMDs, when the owner died on or after the required beginning date. The same applies when an eligible designated beneficiary began life expectancy payments after the owner's death before that date.

The successor cannot substitute their own life expectancy, and the final payout deadline still applies. Following a sole spouse beneficiary's death, subsequent life expectancy calculations reduce the spouse's death year remaining life expectancy by one annually.

For an IRA subject to the ten year rule after the owner's death before the required beginning date, no annual distribution is required before the tenth year.

Roth IRA owners are treated as dying before that date. A successor to a Roth IRA beneficiary who was not an eligible designated beneficiary therefore retains the original deadline without intervening annual RMDs.

This does not eliminate continuing annual life expectancy payments after an eligible designated beneficiary receiving those payments dies.

Spouse beneficiaries and older inheritances

A surviving spouse may elect to treat an inherited IRA as their own only if the spouse is the sole beneficiary with an unlimited right to withdraw. Naming a trust fails this requirement even if the spouse is its sole beneficiary.

The sole spouse exception before required commencement

Apply the postdeath distribution rules as though the spouse were the owner if both conditions below are met.

• The spouse is the sole beneficiary as of the end of the ninth month of the calendar year following the original owner's death.
• The spouse dies before distributions are treated as commencing under the spouse delay rule in Treasury regulation section 1.401(a)(9)-3(d), subject to the qualifying annuity exception below.

Substitute the spouse's death for the original owner's death when applying those rules. Ordinarily, commencement means the required commencement point under that provision, regardless of actual earlier payments.

If the spouse remarried and dies before that commencement point, the spouse's own surviving spouse cannot use the same spouse delay provision.

The qualifying early annuity exception

A qualifying annuity that starts early uses its annuity starting point for the spouse death rule, rather than the ordinary required commencement point. All of these conditions must be met.

• The original owner died before the required beginning date.
• Distributions to the surviving spouse began before required commencement, over a period permitted under section 401(a)(9)(B)(iii)(II).
• The distribution form is an annuity complying with Treasury regulation section 1.401(a)(9)-6(a).
• The spouse dies after benefits commence but before the required commencement point described in section 401(a)(9)(B)(iv)(II).

In that situation, the precommencement spouse treatment does not apply. Annuity distributions must continue under Treasury regulation section 1.401(a)(9)-6(a) over the remaining period over which payments commenced.

An early payment alone does not establish this exception.

Reviewing an older inheritance

The successor deadlines above apply only when the account is subject to the applicable SECURE Act payout rules. Before selecting a schedule for an older inheritance, review the effective date provisions in the linked Treasury regulation with your adviser.

Two related terms

Eligible designated beneficiary: Status is determined at the owner's death and includes a surviving spouse, the owner's minor child, a disabled or chronically ill individual, or someone not more than ten years younger than the owner. Chronic illness requires certification of indefinite, lengthy inability, and the owner's child ceases to qualify at age 21, with the remainder then due within ten years.

Required beginning date: This is the deadline for beginning lifetime required minimum distributions, based on account type, applicable age and, for eligible employer plan participants, retirement. The retirement delay is unavailable for IRAs and employer plan participants who are five percent owners.

Common questions