RMD Calculator Dialog 6 - Successor Beneficiaries

 
Review the RMD Calculator Dialogs - Selector article if you are uncertain about the RMD scenario.
 
This article provides guidance to calculate Required Minimum Distributions (RMDs) for Successor Beneficiaries who inherit retirement accounts from Primary Beneficiaries (defined below) under the 2020 RMD Rules, including the 10-Year Rule exceptions.
 
The Primary Beneficiary must have died after 2019 to use this RMD Calculator Dialog 6 - Successor Beneficiaries. For deaths before 2020, use RMD Calculator Dialogs 1 through 5, depending upon the circumstances.
 
 
 
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Definitions
 

Primary Beneficiary [IMPORTANT DEFINITION for SUCCESSOR BENEFICIAIRIES]

The person who died, whose date of death sets the beginning of the 10-Year Rule distribution period, as applicable. The so-called Primary Beneficiary may be the Participant, the Participant's spouse, a Designated Beneficiary, or other person who died after 2019. The Primary Beneficiary name does not change during the 10-Year Rule distribution period, regardless of who is actually receiving distrbutions.
 

Successor Beneficiary

A person who inherits the account from a Primary Beneficiary, or other Successor Beneficiary post-SECURE Act. All Successor Beneficiaries step into the shoes of the Primary Beneficiary and continue the 10-Year payout period. There are no 10-Year Rule "resets." All Successor Beneficiaries to Successor Beneficiaries are also classed, simply, as Successor Beneficiaries.
 

Eligible Designated Beneficiary (EDBs)

Created under the SECURE Act of 2019, Eligible Designated Beneficiaries (EDBs) are defined as follows:
  • Surviving spouse of Participant. On the surviving spouse's death, the Exception ceases, and the 10-Year Rule payout applies to the Successor Beneficiary. The RMD Calculator requires a deceased spouse to be listed in the Relatives panel on the survivor’s Client Profile screen to proceed with the calculation for a surviving spouse.
     
  • A chronically ill or disabled heir may continue to recalculate RMDs under the 2001 Rules, i.e., "stretch IRA" rules. The advisor should validate the heir's condition based on anecdotal or written evidence from the parent or guardian.
     
  • Heirs not more than 10 years younger than the Participant (original owner) may continue to recalculate RMDs under the 2001 Rules. Upon the heir's death, the 10-Year Rule payout applies to the Successor Beneficiaries. This Exception is beneficial to friends and siblings of a decedent. The RMD Calculator compares the Primary Beneficiary’s year of birth to the Successor Beneficiary’s year of birth. The difference (Successor Beneficiary's year of birth - Primary Beneficiary's year of birth) must be greater than 0 and less than 11. There is no IRS guidance yet on the definition of “not more than 10 years younger.”
     
  • A minor child (but not a grandchild) up to the age of majority (depending on state law). When the child is no longer a minor, the 10-year payout period begins. The RMD Calculator requires a date of birth entry on the child’s Contact Profile, as well as a state of residence. The age of majority is 19 in Alabama and Nebraska; 21 in Mississippi, Puerto Rico, and Guam; and 18 in all other states. The RMD Calculator uses the child's age as of 12/31 of the prior year. There is no IRS guidance yet on the definition of "achieving the age of majority."
     
  • A minor child who is less than age 26 and still in school can follow the 2001 Rules. Once the student is greater than 25 years old, the 10-year payout period begins. The RMD Calculator requires a date of birth entry on the student’s Contact Profile. The child's age as of 12/31 of the prior year is verified to be less than 26. The advisor should assess the validity of the student's academic program based on anecdotal or written evidence from the parent or guardian.  There is no IRS guidance yet on the definition of attaining "the age of 26."
 

Non-Eligible Designated Beneficiary

A Designated Beneficiary who is not an Eligible Designated Beneficiary (EDB) under the SECURE Act of 2019.
 
 
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Successor Beneficiaries Scenarios
 
Gold Subheadings are used below to differentiate the circumstances.
 
Scenario 6A:  Decedent under 2001 Rules Becomes
Primary Beneficiary under 2020 Rules.
  • A Participant, Designated Beneficiary, or Eligible Designated Beneficiary died after 2019.
     
  • The decedent is called the "Primary Beneficiary" for post-2019 computations.
     
  • A 10-Year payout period for the Successor Beneficiary is based on the date of death of the Primary Beneficiary.
     
  • The Successor Beneficiary must deplete the account under the 10-Year Rule.
     
     
Scenario 6B:  Successor Beneficiary Died.
  • A Participant, Designated Beneficiary, or Eligible Designated Beneficiary died after 2019.
     
  • The decedent is called the "Primary Beneficiary" for post-2019 computations.
     
  • The first Successor Beneficiary died during 10-Year payout period.
     
  • The new Successor Beneficiary steps into the shoes of the first Successor Beneficiary and must continue the 10-Year payout period started by the first Successor  Beneficiary.
 
  • The Successor Beneficiaries must deplete the account under the 10-Year Rule.
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Other Successor Beneficiary Scenarios

Successor Beneficiary to pre-SECURE-Act Designated Beneficiary
(2001 Rules)

  • Participant died before 2020.
     
  • The Designated Beneficiary is allowed to "stretch" the RMD payouts (2001 Rules).
     
  • When the Designated Beneficiary dies after 2019, the Successor Beneficiary must start a 10-Year payout period (2020 Rules).
     
  • The next Successor Beneficiary steps into and continues the 10-Year payout period started by the Primary Beneficiary.
     

Successor Beneficiaries to post-SECURE-Act Eligible Designated Beneficiaries


(2020 Rules)

  • Participant died after 2019.
     
  • An Eligible Designated Beneficiary (EDB) is allowed to stretch the RMD payouts for as long
    as the EDB remains eligible.
     
  • The EDB must revert to the 10-Year Rule when he/she is no longer an eligible EDB,
    e.g., a minor child reaching the age of majority, or reaching age 26 if in school.
     
  • If an EDB dies during the stretch period before all funds in the inherited retirement account
    have been distributed, the EDB is considered to be the Primary Beneficiary and the Successor Beneficiaries must commence a 10-Year payout period.
     
  • The 10-Year Rule requires that all funds in the account be distributed by the end of the 10th year after the EDB is no longer an eligible EDB, or dies. The next Successor Beneficiary steps into and continues the 10-Year payout period.
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Scenario 6A:  Designated Beneficiary under 2001 Rules Becomes
Primary Beneficiary under 2020 Rules.
  • A Participant, Designated Beneficiary, or Eligible Designated Beneficiary died after 2019.
     
  • The decedent is now called the "Primary Beneficiary" for post-2019 computations.
     
  • A 10-Year payout period for the Successor Beneficiary is based on the date of death of the Primary Beneficiary.
     
  • The Successor Beneficiary must deplete the account under the 10-Year Rule.
     
     
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Create a Contact Record for the Participant

1.  Enter the name of the Participant as a Contact, including the Birth Date. The Birth Date is not required for calculational purposes but is helpful to track multi-generational Contacts. If no Birth Date is present in Advantage, the RMD Calculation Report will show "not found" for the Date of Birth.
 
2.  On the Personal tab, enter the Date of Death. The Deceased? checkbox will automatically be checked. The Date of Death governs the start of the 10-Year payout period, which commences on January 1 of the year after the Participant's death.
 
 
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Create a Contact Record for the Primary Beneficiary

1.  Enter the name of the Primary Beneficiary as a Contact, including the Birth Date.
 
 
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Create a Client Record for the Primary Beneficiary

  • Contact the account custodian where the Primary Beneficiary or the previous Successor Beneficiary held the account.
     
  • Open a new account for the new Successor Beneficiary.
     
  • Execute the appropriate forms to transfer the previous beneficiary's assets to the account of the new Successor Beneficiary.
     
     
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Open a new Investment Account for the Primary or Successor Beneficiary

  • Contact the account custodian where the Primary Beneficiary or the previous Successor Beneficiary held the account.
     
  • Open a new account for the new Successor Beneficiary.
     
  • Execute the appropriate forms to transfer the previous beneficiary's assets to the account of the new Successor Beneficiary.
 
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Set up the Primary or Successor Beneficiary in ProTracker Advantage

1.  If the Successor Beneficiary is not already in Advantage as a Contact, enter the name of the Successor Beneficiary as a Contact. Enter the Contact’s Birth Date. The Birth Date is not required for calculational purposes but is helpful to track multi-generational Contacts. If no Birth Date is present in Advantage, the RMD Calculation Report will show "not found" for the Date of Birth.
 
2.  If the Successor Beneficiary is not already in Advantage as a Client, create a Client record for the Successor Beneficiary who is receiving the money.
 
3.  Navigate to the Successor Beneficiary Client Profile who is receiving the money.
  • Click on the Accounts tab > Account Summary tab.
  • In the Assistant panel, click on Add an Account.
  • Select the various fields and fill in the requisite information.
  • Select the Account Type to display in the RMD Wizard.
  • Enter the year-end Value and the prior year-end date (12/31/YYYY) in the As Of field.
  • Click on Save and Edit.
 
4.  On the Account Details screen, in the Account Flags panel:
  • Check the Asset Under Management checkbox if the Firm is managing the asset.
  • Check the Required Min. Distrib. Acct. checkbox to push the Account Type to the RMD Wizard.
     
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Step 1. Calculate RMD For
Information required in Steps 2-7 depends on the selection in Step 1.  
 
 
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Set up the RMD Calculator for the Successor Beneficiary

1.  In the Assistant panel, double-click on Calculate RMD.
 
2.  On the RMD Calculator screen:
Step 1. Select the Successor Beneficiary option.
    
Step 2. Select the name of the Primary Beneficiary, which may be the Participant, a Previous Designated Beneficiary, or a previous Eligible Designated Beneficiary. Confirm that the Date of Birth and Date of Death are correct for the Primary Beneficiary. The Date of Death shown in Step 2 starts the clock on the 10-year period.
 
Note: The name of the Primary Beneficiary stays the same for all Successor Beneficiaries, regardless of how many Successor Beneficiaries there are. The Primary Beneficiary's Date of Death establishes the beginning of the 10-year period.
 
Step 3. Select the Plan Type, usually "IRA." All of the Plan Types fall under the same rules.
 
Step 4. Check the checkbox if the Participant was enrolled in a collective bargaining plan, a state or local government 403(b) plan or 457 plan, or in the Federal Thrift Savings Plan. Under the SECURE Act, if any of these checkboxes are checked, there is a two-year delay in applying the 2020 Rules. For these beneficiaries, the effective date of the SECURE Act is postponed until January 1, 2022.
 
Step 5. Select the name of the Successor Beneficiary.
 
 In the Received From pick list, select Primary Beneficiary.
 
 Place a checkmark in the 10-Year Rule Exception checkbox, if applicable.
 
Step 6. Enter the year-end Account Value (as of the prior year-end date).
 
 Enter the Valuation Date (prior year-end date: 12/31/YYYY).
 
Step 7. Click the Calculate RMD button.
 
 Click on the View RMD Calculation button to see the report.
 
The RMD Calculator Screen and the RMD Calculation Report will look similar to the following images:
 
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RMD Calculator Screen

 
 
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RMD Calculator Report

 
 
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Scenario 6B:  Successor Beneficiary Died.
  • A Participant, Designated Beneficiary, or Eligible Designated Beneficiary died after 2019.
     
  • The decedent is called the "Primary Beneficiary" for post-2019 computations.
     
  • The first Successor Beneficiary died during 10-Year payout period.
     
  • A new Successor Beneficiary steps into the shoes of the first Successor Beneficiary and must continue the 10-Year payout period started by the first Successor  Beneficiary.
 
  • The Successor Beneficiaries must deplete the account under the 10-Year Rule.
     
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Create a Contact Record for the Primary Beneficiary

1.  Enter the name of the Primary Beneficiary as a Contact, including the Birth Date. The Birth Date is not required for calculational purposes but is helpful to track multi-generational Contacts. If no Birth Date is present in Advantage, the RMD Calculation Report will show "not found" for the Date of Birth.
 
2.  On the Personal tab, enter the Date of Death. The Deceased? checkbox will automatically be checked. The Date of Death governs the start of the 10-Year payout period, which commences on January 1 of the year after the Participant's death.
 
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Create a Contact Record for the Successor Beneficiary

1.  Enter the name of the Successor Beneficiary as a Contact, including the Birth Date. The Birth Date is not required for calculational purposes but is helpful to track multi-generational Contacts. If no Birth Date is present in Advantage, the RMD Calculation Report will show "not found" for the Date of Birth.
 
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Create a Client Record for the Successor Beneficiary

  • Contact the account custodian where the Primary Beneficiary or the previous Successor Beneficiary held the account.
     
  • Open a new account for the new Successor Beneficiary.
     
  • Execute the appropriate forms to transfer the previous beneficiary's assets to the account of the new Successor Beneficiary.
     
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Create an Investment Account for the Successor Beneficiary

  • Contact the account custodian where the Primary Beneficiary or the previous Successor Beneficiary held the account.
     
  • Open a new custodial account for the new Successor Beneficiary.
     
  • Execute the appropriate forms to transfer the previous beneficiary's assets to the account of the new Successor Beneficiary.
     
    4.  Navigate to the Successor Beneficiary Client Profile who is receiving the money.
  • Click on the Accounts tab > Account Summary tab.
  • In the Assistant panel, click on Add an Account.
  • Select the various fields and fill in the requisite information.
  • Select the Account Type to display in the RMD Wizard.
  • Enter the year-end Value and the prior year-end date (12/31/YYYY) in the As Of field.
  • Click on Save and Edit.
 
5.  On the Account Details screen, in the Account Flags panel:
  • Check the Asset Under Management checkbox if the Firm is managing the asset.
  • Check the Required Min. Distrib. Acct. checkbox to push the Account Type to the RMD Wizard.
     
    6.  In the Assistant panel, double-click on Calculate RMD
     
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Step 1. Calculate RMD For
Information required in Steps 2-7 depends on the selection in Step 1.  
 
 
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Set up the RMD Calculator for the Successor Beneficiary

1.  In the Assistant panel, double-click on Calculate RMD.
 
2.  On the RMD Calculator screen:
 
Step 1. Select the Successor Beneficiary option.
    
Step 2. Select the name of the Primary Beneficiary, which may be the Participant, a Previous Designated Beneficiary, or a previous Eligible Designated Beneficiary. Confirm that the Date of Birth and Date of Death are correct for the Primary Beneficiary. The Date of Death shown in Step 2 starts the clock on the 10-year period.
 
Note: The name of the Primary Beneficiary stays the same for all Successor Beneficiaries, regardless of how many Successor Beneficiaries there are. The Primary Beneficiary's Date of Death establishes the beginning of the 10-year period.
 
Step 3. Select the Plan Type, usually "IRA." All of the Plan Types fall under the same rules.
 
Step 4. Check the checkbox if the Participant was enrolled in a collective bargaining plan, a state or local government 403(b) plan or 457 plan, or in the Federal Thrift Savings Plan. Under the SECURE Act, if any of these checkboxes are checked, there is a two-year delay in applying the 2020 Rules. For these beneficiaries, the effective date of the SECURE Act is postponed until January 1, 2022.
 
Step 5. Select the name of the Successor Beneficiary.
 
 In the Received From pick list, select Primary Beneficiary.
 
 Place a checkmark in the 10-Year Rule Exception checkbox, if applicable.
 
Step 6. Enter the year-end Account Value (as of the prior year-end date).
 
 Enter the Valuation Date (prior year-end date: 12/31/YYYY).
 
Step 7. Click the Calculate RMD button.
 
 Click on the View RMD Calculation button to see the report.
 
The RMD Calculator Screen and the RMD Calculation Report will look similar to the following images:
 
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RMD Calculator Screen

 
 
 
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RMD Calculator Report

 
 
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RMD Wizard
After setting up an RMD for the above situations, the Advantage RMD Wizard will calculate future RMDs without requiring further setup.
 
Further RMD calculations for this account will be calculated automatically by the RMD Wizard each year. 
 
To see the RMD Wizard, click on Operations > Accounts > RMD. In the Assistant panel, click on RMD Wizard.
 
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RMD Calculation Assistance
ProTracker Software provides limited RMD calculation assistance. Print the RMD Scenario Fact Set form and email it as an attachment to: sales@protracker.com.
 
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RMD Resources
 
RMD Client Overview (includes index of RMD Help Articles)
 
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