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February 19, 2009

Designated Beneficiary

Your Guide



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 by default.

If the beneficiary is a non-person such as an estate, then the retirement account has a beneficiary, but not a designated beneficiary.  Therefore, when calculating the RMD amounts, the calculation is therefore done as if the account has no beneficiary.

For retirement a account that does not have a designated beneficiary, the following applies:

  • While the retirement account owner is alive:
    • The RMD is calculated using the uniform tables, which assumes the retirement account owner has a beneficiary that is ten years his/her junior. This is the same rule that applies in all other cases, except where the spouse is the sole primary beneficiary and is more than 10-year the junior of the retirement account owner. Under this exception, the joint life and annuity tables are used.
  • After the retirement account owner’s death:
    • If the retirement account does before the RBD, the assets must be distributed under the give year rule
    • If the retirement account owner dies on or after the RBD, the assets must be distributed over the remaining life expectancy of the decedent. The life expectancy is non-recalculated.

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 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.

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 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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