Under the SECURE Act (2019) , beneficiary designations took on added importance because the SECURE Act introduced a 10-Year Rule wherein account custodians must distribute the total amount of the retirement account within ten years.
Non-designated beneficiaries (charities, estates, and non-see-through trusts) may have only five years to distribute the account if the participant died before his or her Required Beginning Date (the 5-Year Rule).
Under the new SECURE Act of 2019 rules, Required Minimum Distributions (RMDs) for beneficiaries inherited after 2019 depend upon the date of death of the Participant.
We added a sixth option in Step 1 to accommodate the 10-Year Rule, specifically, the “Successor Beneficiary” option. We now designate the Participant as the “Primary Beneficiary.” All follow-on beneficiaries are “Successor Beneficiaries.”
A Non-Designated Beneficiary is an estate, charity, or non-see-through trust. None of these entities are natural persons.
The 2001 Required Minimum Distribution (RMD) Rules for Non-designated Beneficiaries were minimally affected by the SECURE Act of 2019. The change from 70-1/2 to 72 years of age for RMDs indirectly caused the Required Beginning Date (RBD) to slip slightly.
If the participant died before his or her RBD, the custodian must distribute the account to the beneficiary using the 5-Year Rule.
The SECURE Act of 2019 dramatically altered the rules for Required Minimum Distributions (RMDs) for designated beneficiaries. The distribution of an RMD to a designated beneficiary or a successor beneficiary now depends upon the date of death of the participant.