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February 19, 2009

Designated Beneficiary

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Definition

A designated beneficiary is a beneficiary whose life expectancy is eligible to be used to calculate required minimum distributions (RMD) for a qualified plan, 403(b) account, 457(b) plan or IRA. The designated beneficiary can be the person who the retirement account owner identifies on the beneficiary form to inherit the retirement account balance, or the person who is the beneficiary under the terms of the plan document.  A qualified see-through trust is also a designated beneficiary.

A beneficiary that does not qualify to be a designated beneficiary is commonly referred to in the industry as a non-designated beneficiary. Examples include an estate and a charity.

Referring Cite

IRC §401(a)(9)(E), Treas. Reg. §1.401(a)(9)-4, Q&A-1

Additional Helpful Information

The designated beneficiary, for purposes of determining whose life expectancy is used to calculated post-death RMDs is determined by September 30 of the year following the year the retirement account owner dies. Treas. Reg. §1.401(a)(9)-4, Q&A 4(a)-(c)

An individual can still be a designated beneficiary, even if the person was not named on the beneficiary designation form, providing the person can be identified as the beneficiary. Treas. Reg. §1.401(a)(9)-4, Q&A-1].  For instance, assume that  an individual did not name a beneficiary on the beneficiary form, but the default provisions of the plan document or IRA agreement says something to the effect that “…if no beneficiary is named, the designated beneficiary will be the spouse, then in such a case, the spouse would be the designated beneficiary, and have the same rights that he/she would have had, had he/she been named as the beneficiary on the beneficiary form.

A designated beneficiary is an eligible designated beneficiary if they fall under a certain class at the time of the account owner’s death. Click here for details

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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