Pub. 2 2021 Issue 6

9 ISSUE 6 | 2021 Lisa Haberman is a Consultant with the ERISA Compliance Department at Ascensus. Ms. Haberman interacts daily with internal partners to answer client questions through Ascensus’ 800 Consulting Service. She also participates in technical reviews, assists in updating forms and documents, and prepares articles for industry publication. For more information about Ascensus, visit them online at ascensus.com . The successor beneficiary may either continue the schedule of payments under either of these options or accelerate payments. After SECURE If the account owner died before Jan. 1, 2020, and the original beneficiary died on or after Jan. 1, 2020, the successor beneficiary must withdraw all assets according to the 10-year rule based on the original beneficiary’s death, regardless of whether the original beneficiary was taking single life expectancy payments or payments under the 5-year rule. This means that all assets must be distributed by Dec. 31 of the 10th calendar year after the original beneficiary’s death. If both the account owner and original beneficiary died on or after Jan. 1, 2020, the successor beneficiary must withdraw all assets according to the 10-year rule. But the length of the 10-year period will depend on what type of beneficiary the original beneficiary was. If the original beneficiary was considered an “eligible designated beneficiary,” the successor beneficiary’s 10-year timeframe is based on the date of the original beneficiary’s death. In other words, the successor beneficiary of an eligible designated beneficiary must distribute his entire interest by Dec. 31 of the 10th calendar year after the original beneficiary’s death. Example An account owner, Sue, died in July 2020. The original beneficiary was Sue’s brother, John, who was five years younger. John, considered an eligible designated beneficiary, died less than a year later in March 2021. John had named his daughter, Beth, as the successor beneficiary. Beth is required to distribute the assets according to the 10-year rule based on the date of John’s death (not Sue’s). This means that Beth has until Dec. 31, 2031 (not Dec. 31, 2030), to deplete the assets. In contrast, if the original beneficiary was not considered an eligible designated beneficiary, the successor beneficiary’s 10-year timeframe is based on the account owner’s date of death. Thus, the successor beneficiary of a non-eligible designated beneficiary must withdraw his entire interest by Dec. 31 of the 10th calendar year following the account owner’s death. Consequently, these successor beneficiaries generally have less time to distribute what’s left of their interest in an account. Eligible Designated Beneficiary The surviving spouse of the deceased account (IRA or retirement plan) owner is considered an “eligible designated beneficiary,” as are minor children of the account owner, disabled or chronically ill individuals, and individuals not more than 10 years younger than the deceased account owner. The distinction between the original beneficiary being considered an eligible designated beneficiary and not an eligible designated beneficiary is important, because — as noted above — it affects the successor beneficiary’s timeframe for distributing the assets. 