How to Handle RMDs for Designated Beneficiaries

​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.

​If the participant died before 2020, leaving the account to a designated beneficiary, the 2001 rules apply. The designated beneficiary may continue receiving RMDs under the old “stretch IRA” provisions.

​On the other hand, if the participant died after 2019, the designated beneficiary must follow a new 10-Year Rule wherein account custodians must distribute the total amount of the retirement account within ten years. We added another option Step 1 to accommodate the 10-Year Rule, specifically, the “Successor Beneficiary” option for participants dying after 2019.

If the successor beneficiary dies during the 10-Year Rule period, the next successor beneficiary falls under the original successor beneficiary’s 10-Year Rule (based on the date of death of the participant). Effectively, there is no “10-Year Rule reset.”
The marginal tax rates come into play as distributions are made. ProTracker Software’s ProTracker Advantage® client relationship management (CRM) system documents the distribution decisions to assist the advisor in remembering the client's parameters. Learn more information about calculating RMDs and documenting them here.