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.
Required minimum distributions (RMDs) for spouses took a slightly new turn under the SECURE Act of 2019. The Required Beginning Date (RBD) was changed to April 1 of the year after the participant would have reached age 72. The RBD age for the past 44 years was 70-1/2.
If the participant died before his or her RBD...
The SECURE Act of 2019 introduced a new term “Eligible Designated Beneficiary.” The Act established a 10-Year Rule as the maximum payout period for inherited retirement accounts that were inherited from participants dying after 12/31/2019, with a few exceptions. The exceptions apply to Eligible Designated Beneficiaries (EDBs), defined as follows:
The SECURE Act (2019) dramatically altered the retirement rules, including the introduction of a 10-Year Rule. Under this rule, account custodians must distribute the total amount of the retirement account to the inheritor within ten years.
The complexity of each Required Minimum Distribution (RMD) scenario can be mind-boggling. The best approach is to set up each client scenario in a client relationship management (CRM) system such as ProTracker Advantage®.
Once the initial parameters for a client scenario are saved, an RMD Wizard may be used to rapidly compute each client’s RMD for the new year. There is no need to look up longevity factors in a table and type them into a spreadsheet.
The first step in calculating a Required Minimum Distribution (RMD) is to understand the client scenario. There are six possible scenarios.