What happens when a retirement account beneficiary dies

The original ten year deadline can continue

If the original designated beneficiary was not an eligible designated beneficiary, that beneficiary's death does not restart the owner's ten year payout period. The account must be emptied by December 31 of the calendar year containing the tenth anniversary of the owner's death.

If the owner died on or after the required beginning date, annual distributions also continue every year until the account is fully distributed. The final payout deadline applies alongside those annual payments.

Life expectancy payments can continue alongside a final deadline

When an eligible designated beneficiary receiving life expectancy payments dies, the remaining account generally must be emptied by December 31 of the calendar year containing the tenth anniversary of that beneficiary's death.

Required annual distributions continue until the account is fully distributed, whether the owner died before, on or after the required beginning date. The surviving spouse exception below can change whose death date controls.

The earliest applicable final deadline controls. If the original beneficiary qualified as eligible solely because the beneficiary was the owner's minor child, another deadline is December 31 of the calendar year containing the tenth anniversary of that child's 21st birthday.

The child's later death does not extend that deadline, and a death based deadline can be earlier.

The successor does not use a new life expectancy

A successor does not calculate annual required minimum distributions using the successor's own life expectancy. For a single individual designated beneficiary, the inherited calculation continues using the Single Life Table.

For an original beneficiary who was not the owner's spouse, the initial life expectancy uses that beneficiary's age in the calendar year following the owner's death. Reduce that initial expectancy by one for each elapsed calendar year.

For the owner's sole surviving spouse beneficiary, life expectancy is redetermined annually through the spouse's death year. For each subsequent year, reduce the spouse's death year expectancy by one for each calendar year that has elapsed.

If the owner died on or after the required beginning date, use the greater of the designated beneficiary's remaining life expectancy and the owner's remaining life expectancy. The owner's expectancy starts with the owner's age in the death year and declines by one annually.

An unpaid beneficiary distribution can be due that same year

If an annual beneficiary required minimum distribution is due in the beneficiary's death year, any unpaid amount must be distributed to that beneficiary's beneficiaries during that same calendar year.

This applies to continuing annual distributions after the owner's death on or after the required beginning date. It also applies to an eligible designated beneficiary receiving life expectancy payments after the owner's death before that date.

This beneficiary obligation is separate from the owner's death year distribution. A ten year deadline alone does not establish an annual distribution obligation for every beneficiary.

A surviving spouse exception can change the controlling death date

If the owner died before the required beginning date and the sole surviving spouse beneficiary dies before distributions are treated as commencing under the spouse delay rule, apply the postdeath distribution rules as though the spouse were the owner.

Substitute the spouse's death date for the original owner's death date. The spouse must have been the sole beneficiary as of September 30 of the calendar year following the original owner's death.

Under the spouse delay rule, commencement may wait until the end of the calendar year in which the original owner would have reached the applicable age.

For this exception, distributions are treated as commencing on the required commencement date, even if the spouse voluntarily received payments earlier. An annuity that starts early has a separate exception and is outside this explanation.

If the spouse remarried and died before distributions were treated as commencing, that spouse's own surviving spouse cannot claim another delay under the same spouse delay rule.

This inherited account exception is separate from electing to treat an inherited IRA as one's own.

An irrevocable election also binds later beneficiaries

If the owner died before the required beginning date, a plan may permit an eligible designated beneficiary to elect between the ten year rule and life expectancy payments.

The election deadline is the end of the earlier of the ten year payout year and the year life expectancy payments would have to begin, including any applicable spouse delay.

The plan must specify the method that applies if no election is made. At the deadline, the election must be irrevocable for the beneficiary and all subsequent beneficiaries and apply to all subsequent calendar years.

Death during an elected ten year period does not create a fresh election for the successor.

Another successor's death does not reset the deadline

A further successor's death does not restart an already applicable final payout deadline tied to the original owner's death, the original eligible designated beneficiary's death or the owner's minor child reaching age 21.

Any continuing annual payment obligation remains in place. This explanation excludes multiple original beneficiaries and trust arrangements.

Two related terms

Eligible designated beneficiary. This category includes the surviving spouse, the owner's minor child, a disabled or chronically ill individual, and someone not more than ten years younger than the owner, with status determined at the owner's death. Chronic illness requires certification of an indefinite, lengthy inability, and eligibility based solely on being the owner's minor child ends at age 21.

Required beginning date. For an IRA, this is April 1 of the year after the owner reaches the applicable age. For an employer plan, it is April 1 after the later of reaching that age or retiring, except that the retirement delay does not apply to a five percent owner.

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