IRAs and Beneficiary Distributions: SECURE Act Changes Distribution Requirements for Some Individuals
ComplianceTax & AccountingNovember 11, 2020

IRAs and beneficiary distributions: SECURE Act changes distribution requirements for some individuals


The Setting Every Community Up for Retirement Enhancement Act of 2019 (i.e., the SECURE Act) was passed on December 20, 2019 and modifies the rules related to timing of distributions from individual retirement accounts (IRAs) after the death of the IRA owner. The SECURE Act creates a new category of beneficiaries resulting in three categories with each category having specific distribution rules. The three beneficiary categories are: eligible designated beneficiary, designated beneficiary, and not a designated beneficiary. Below are the three categories and the distribution requirements for each category. Additionally, the SECURE Act has introduced a new distribution requirement for certain beneficiaries, the 10-year rule.

Eligible designated beneficiary

Any of the following individuals are considered an eligible designated beneficiary (EDB): a surviving spouse, a disabled or chronically ill individual, an individual who is not more than 10 years younger than the IRA owner, or a child of the IRA owner who has not reached the age of majority. Additionally, certain trusts named as an IRA beneficiary are considered EDBs.

A person is considered disabled if he/she meets the definition of disabled in Internal Revenue Code (IRC) Section 72(m)(7) which states “ individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration”.

For IRA EDB purposes, a person is considered chronically ill if his/her condition meets the definition of chronically ill under IRC Section 7702B(c)(2). Such individual will be treated as meeting the definition if there is certification that the individual is unable to perform at least two activities under paragraph (A)(i) of IRC Section 7702B(c)(2) and the illness is an indefinite one which is reasonably expected to be of lengthy nature.

Distribution rules: Spouse beneficiary

A deceased IRA owner’s surviving spouse who is the beneficiary of the decedent’s IRA can treat the IRA as his/her own IRA, or can choose to continue acting in the capacity of a beneficiary and distribute the assets using the single life expectancy rule, or the 10-year rule.

Jack passed away in 2020 at age 72 and his traditional IRA beneficiary is his spouse Diane, age 71. As a surviving spouse Diane can treat Jack’s IRA as her own IRA. Furthermore, because Diane is an EDB she can elect single life expectancy distributions, or the 10-year rule.

Distribution rules: Disabled or chronically ill

A disabled or chronically ill individual may elect either single life expectancy or the 10-year rule.

Karen passed away in 2020 at age 56 and the beneficiary of her Roth IRA is her disabled daughter, age 29. Karen’s disabled daughter is an EDB and may elect the single life expectancy option, or the 10-year rule.

Distribution rules: Individual not more than 10 years younger than IRA owner

A nonspouse beneficiary who is not more than 10 years younger than the IRA owner may elect the single life expectancy option, or the 10-year rule.

Gerri passed away in 2020 at age 35 and her brother Walter, age 33 is the beneficiary of her Roth IRA. Walter is not more than 10 years younger than Gerri, therefore Walter may take distribution annually from the IRA over his single life expectancy or choose the 10-year rule.

Distribution rules: IRA owner’s minor child

A child of an IRA owner who has not reached the age of majority may initially take death distributions using the single life expectancy rule, however upon attaining the age of majority he/she will be subject to a 10-year payout period.

Leigh passed away in 2020 at age 36 and her son Brandon, age 5 is the beneficiary of her traditional IRA. Brandon will receive single life expectancy payments until he reaches the age of majority. Upon the age of majority he must distribute the remaining balance within 10 years.

Designated beneficiary

A designated beneficiary (DB) is a nonspouse individual that does not meet one of the requirements to be an EDB. Certain trusts that are named as an IRA beneficiary will also be categorized as a DB.

Distribution rules

A DB must deplete an inherited IRA using the 10-year rule. The SECURE Act has eliminated single life expectancy payments for DBs.

Billy passed away in 2020 at age 72 and the beneficiaries of his traditional IRA are his son, John, age 45, and his daughter, Jane, age 48. Because John and Jane are DBs they must take distributions from the inherited IRA using the 10-year rule.

Not a designated beneficiary

An IRA beneficiary that does not have a life expectancy is considered a nondesignated beneficiary. Generally speaking, except for a trust that qualifies as an EDB or DB, any nonindividual IRA beneficiary (e.g., estates, charitable organizations, nonqualified trusts) is considered a nondesignated beneficiary.

Distribution rules

The SECURE Act did not change the distribution rules for a nonindividual beneficiary. If a traditional IRA owner passes away before his/her required beginning date (RBD), or a Roth IRA owner passes away, the beneficiary must distribute the assets within five years. If a traditional IRA owner passes away after his/her RBD, the beneficiary must continue distributions using the decedent’s single life expectancy.


The SECURE Act modified the distribution rules for certain individuals that inherit IRA assets in 2020 or later. However, congress recognizes that certain individuals referred to as eligible designated beneficiaries, including those who are disabled or chronically ill, may need inherited IRA assets for support over a long period of time so these individuals will continue to have the single life distribution method available to them.

The biggest change applies to individuals or certain trusts that inherit an IRA in 2020 and fall into the DB category. Designated beneficiaries are subject to the 10-year rule, whereas if an IRA owner died in 2019 or earlier these same individuals could have taken distributions over their life expectancy.

The distribution requirement for non-designated beneficiaries (i.e., generally a nonindividual) remain the same as the pre-SECURE Act rules.  Although the distribution rules for some beneficiaries are more restrictive, a beneficiary in any situation may take a lump sum distribution at any time.

While not a requirement, it is in an IRA custodian/trustee’s best interest to fully understand the distributions options for beneficiaries under the SECURE Act which are effective for deaths after December 31, 2019. Additionally, it is important to note that the IRS has not provided its guidance with respect to the new rules and therefore the information provided above is subject to some modification.

We can be your SECURE Act Resource. Helping you navigate the SECURE Act rules with tools, support and information. Find the answers you need, along with an easy sign-up email alert, so you can get the news you need, in your inbox!

Diana Theis
Senior Specialized Consultant, Tax Advantaged Accounts
With more than 30 years of experience, Diana has worked closely with hundreds of financial organizations to help them create, implement, and maintain their tax-advantaged accounts program.

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