An "Eligible Designated Beneficiary" ("EDB") is a beneficiary designated by a Investment Retirement Account (IRA), by the IRA owner or determined under the IRA agreement and is: 

• Surviving Spouse 
• Minor Child 
• Disabled Beneficiary 
• Chronically Ill individual 
• An individual not described above who is not more than 10 years younger than the IRA owner

A "Designated Beneficiary" is an individual that is not an eligible designated beneficiary or qualifying see-through trust.  

A "Nondesignated Beneficiary" is a beneficiary that is not an eligible designated beneficiary not a designated beneficiary and not a non-individual (estates, charitable organizations or nonqualified trusts). 

The SECURE Act, (for the most part) eliminated required minimum distributions for inherited IRAs.  (SECURE stands for Setting Every Community Up for Retirement Enhancement and was passed in 2019 to help Americans save for retirement and to make it easier for employers and employees to participate in tax advantaged savings plans).  

SECURE eliminated most of the "stretch" payout and most payouts over life expectancy.  

SECURE did not change the requirement for the beneficiary to take the year-of-death Required-Minimum-Distribution (RMD) by December 31 of year of death.    

The Eligible Designated Beneficiary is the only class of beneficiary still entitled to "stretch".  The EDB's life expectancy will be used to calculate the Required Minimum Distribution regardless of whether the the participant was older or younger than 73.  The Eligible Designated Beneficiary has until December 31 of the year following death to begin taking RMDs.  But, if participant was younger than 73, spouse has until December 31 of the year in which the participant would have reached RMD age to take first RMD. 

The ability to use "stretch" ends when EDB status ceases. 

The Good News: The EDB can take distributions over 10-year period instead of as lump sum. 

The Bad News:  There are penalties if the EDB does not take the distribution as directed by SECURE.  

If the participant was younger than 73, all funds must be distributed by December 31 of the 5th year following participant's death.  

If participant was 73+, assets are distributed based on participant's life expectancy, which is called the "ghost rule".  

Contact your investment advisor professional for advice regarding your investment distribution. 

The Law Offices of Gayla K. Austin LLC can assist with revising or creating your beneficiary designation documents.  

Law Offices of Gayla K. Austin LLC 

Tel:  307.200.1914