The publication leaves many payout requirements unchanged. For instance, eligible beneficiaries are still allowed to stretch distributions over their life expectancy under current law. Eligible beneficiaries include spouses of account holders, disabled beneficiaries, those less than 10 years younger than the account owner, minor children of the account holder and “see-through” trusts.
Minor beneficiaries are still only eligible to stretch their distributions until they reach age of majority as defined by their state of residence.
But non-eligible beneficiaries, including named non-spousal beneficiaries such as non-minor children and grandchildren who have been subject to the 10-year distribution rule that stated they had to distribute funds within a decade, are now in limbo, Goldberg said.
Because the IRS’s original SECURE Act guidance made no mention of RMDs, advisors interpreted the SECURE Act’s 10-year rule for non-eligible beneficiaries much like the IRS’s five-year rule that is triggered when there is no named beneficiary. Under this interpretation, the individual who is determined to be the beneficiary has full discretion over how and when to empty a retirement account as long as it is within the specified period of time.
“According to the SECURE Act if an individual is a designated beneficiary, then the designated beneficiary is required in general to receive the deceased IRA owner’s entire account balance by no later than the 10th year following the IRA owner’s year of death in order to avoid the 50% IRS penalty tax,” Goldberg said.