Eligible Designated Beneficiaries: The Five Categories and What Each Gets

Who is an eligible designated beneficiary?

An eligible designated beneficiary is an individual named as beneficiary of a retirement account who, on the date the owner dies, is the owner’s surviving spouse, the owner’s child who has not reached majority, disabled, chronically ill, or not more than 10 years younger than the owner (IRC § 401(a)(9)(E)(ii)). Among designated beneficiaries, only an eligible designated beneficiary may take distributions over the beneficiary’s own life expectancy instead of emptying the account within ten years (§ 401(a)(9)(H)(i), (ii)). A beneficiary that is not a designated beneficiary, such as an estate, follows separate rules.

The statute lists the categories this way. An eligible designated beneficiary is any designated beneficiary who is:

• “the surviving spouse of the employee,”
• “a child of the employee who has not reached majority (within the meaning of subparagraph (F)),”
• “disabled (within the meaning of section 72(m)(7)),”
• “a chronically ill individual (within the meaning of section 7702B(c)(2),” with a modification described below, or
• “an individual not described in any of the preceding subclauses who is not more than 10 years younger than the employee.”

The statute speaks of the “employee” because it is written for employer plans. The same rules reach IRAs through IRC § 408(a)(6), and the regulations substitute the IRA owner for the employee (Treas. Reg. § 1.408-8(a)(3)). The definitions are filled in by Treas. Reg. § 1.401(a)(9)-4(e), part of the final regulations published in July 2024 (T.D. 10001), which apply for determining required distributions for calendar years beginning on or after January 1, 2025 (§ 1.401(a)(9)-1(d)). A designated beneficiary who is not an eligible designated beneficiary follows the ten-year rule.

When status is decided

The test is applied once. The statute says the determination “shall be made as of the date of death of the employee” (§ 401(a)(9)(E)(ii)). A beneficiary who becomes disabled or chronically ill after the owner dies does not become an eligible designated beneficiary. The regulations illustrate this with a child who becomes disabled the year after the parent’s death: the child is treated as a minor child only, and the ten-year period starts when the child reaches majority (§ 1.401(a)(9)-4(e)(9), Example 3).

An eligible designated beneficiary must first be a designated beneficiary, which means an individual. A person that is not an individual, such as an estate, is not one (§ 1.401(a)(9)-4(b)). A trust is not an individual either, but the beneficiaries of a trust that meets the see-through requirements can be treated as the account’s beneficiaries; see naming a trust as IRA beneficiary.

How each category is defined

Surviving spouse. A person is the owner’s spouse if the marriage is recognized for federal tax purposes, and for distributions after death the spouse is determined as of the date of death (Treas. Reg. § 1.401(a)(9)-8(c)).

Child who has not reached majority. The child must be a child of the owner. The regulation uses the definition in IRC § 152(f)(1), which covers a son, daughter, stepson, or stepdaughter, a legally adopted child or a child lawfully placed with the owner for legal adoption, and an eligible foster child (§ 1.401(a)(9)-4(e)(1)(ii)). A minor who is not the owner’s child within that definition is not in this category; being the owner’s grandchild does not by itself make a minor the owner’s child. Majority is a fixed federal age for this purpose: “An individual reaches the age of majority on the individual’s 21st birthday” (§ 1.401(a)(9)-4(e)(3)).

Disabled. The statute borrows the definition in IRC § 72(m)(7): a person is disabled if unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration. The regulation applies that test to a beneficiary who is 18 or older on the date of death (§ 1.401(a)(9)-4(e)(4)(ii)). A beneficiary under 18 is disabled if the impairment results in marked and severe functional limitations and can be expected to result in death or to be of long-continued and indefinite duration (§ 1.401(a)(9)-4(e)(4)(iii)). A person the Commissioner of Social Security has determined to be disabled as of the date of death, under 42 U.S.C. 1382c(a)(3), is deemed disabled (§ 1.401(a)(9)-4(e)(4)(iv)).

Chronically ill. The starting point is IRC § 7702B(c)(2), the definition used for long-term care insurance. It covers an individual certified by a licensed health care practitioner as unable to perform, without substantial assistance, at least two activities of daily living for at least 90 days; as having a similar level of disability; or as requiring substantial supervision because of severe cognitive impairment. The six activities are eating, toileting, transferring, bathing, dressing, and continence. For inherited accounts the first branch is stricter. The certification must state that the inability is “an indefinite one which is reasonably expected to be lengthy in nature” (§ 401(a)(9)(E)(ii)(IV); § 1.401(a)(9)-4(e)(5)).

Not more than 10 years younger. This is measured by dates of birth, not by calendar years. The regulation’s example: if the owner was born on October 1, 1953, a beneficiary qualifies if born on or before October 1, 1963 (§ 1.401(a)(9)-4(e)(6)). On its terms the test also covers a beneficiary who is older than the owner.

The regulation adds one further group. A designated beneficiary of an owner who died before section 401(a)(9)(H) took effect (generally, a death before January 1, 2020) is treated as an eligible designated beneficiary (§ 1.401(a)(9)-4(e)(1)(vi); § 1.401(a)(9)-1(b)(2)).

Proof of disability or chronic illness

For an employer plan, a disabled or chronically ill beneficiary qualifies only if documentation of the condition is given to the plan administrator by October 31 of the calendar year following the calendar year of the owner’s death, or by October 31, 2025, if that is later (§ 1.401(a)(9)-4(e)(7)). For a chronically ill beneficiary the documentation must include a certification from a licensed health care practitioner. The regulations show what a missed deadline costs: a disabled child whose documentation is late stops being an eligible designated beneficiary on reaching majority, and the ten-year period then begins (§ 1.401(a)(9)-4(e)(9), Example 2).

IRAs are treated differently on this one point. The documentation “need not be provided to the IRA trustee, custodian, or issuer” (Treas. Reg. § 1.408-8(b)(4)(i)). That provision removes the filing step. On its terms it does not change the definitions, which are still tested as of the date of death.

What an eligible beneficiary may do

The general rule after the SECURE Act is that a designated beneficiary must receive the whole account within ten years (§ 401(a)(9)(H)(i)). The exception that allows payments over the beneficiary’s life or life expectancy, § 401(a)(9)(B)(iii), now applies “only in the case of an eligible designated beneficiary” (§ 401(a)(9)(H)(ii)).

When the owner died before the required beginning date, life-expectancy payments must begin by the end of the calendar year following the year of death and continue every year until the account is fully distributed (Treas. Reg. § 1.401(a)(9)-3(c)(4)). In that case the life-expectancy rule is the default for an eligible designated beneficiary, but a plan may instead apply the ten-year rule to some or all eligible beneficiaries, or let the beneficiary choose between the two (§ 1.401(a)(9)-3(c)(5)). The account’s own terms therefore matter. When the owner died on or after the required beginning date, annual distributions simply continue, measured by the longer of the beneficiary’s and the owner’s remaining life expectancy (§ 1.401(a)(9)-5(d)(1)). How each year’s amount is figured is on the inherited-account RMD page.

A surviving spouse has further options that no other beneficiary has, including delaying distributions and treating an IRA as the spouse’s own; these are set out on the spouse-versus-non-spouse page. If a spouse who is the sole beneficiary dies before distributions to the spouse have begun, the rules are applied as if the spouse were the employee (§ 401(a)(9)(B)(iv)(III); § 1.401(a)(9)-3(e)).

What ends the life-expectancy period

Life-expectancy treatment does not pass to the next person in line. Two events start a ten-year period.

• A minor child reaches majority. The child “shall cease to be an eligible designated beneficiary as of the date the individual reaches majority,” and the remainder must be distributed within 10 years after that date (§ 401(a)(9)(E)(iii)). Under the regulations the deadline is the end of the calendar year that includes the tenth anniversary of the child’s 21st birthday (Treas. Reg. § 1.401(a)(9)-5(e)(4)). A child who was also disabled at the parent’s death, and who met the documentation requirement, remains an eligible designated beneficiary after 21 (§ 1.401(a)(9)-4(e)(9), Example 1).
• The eligible designated beneficiary dies. The exception does not apply to that person’s own beneficiary, and the remainder must be distributed within 10 years after the death (§ 401(a)(9)(H)(iii)). The regulatory deadline is the end of the calendar year that includes the tenth anniversary of the death (§ 1.401(a)(9)-5(e)(3)).

Where more than one of these deadlines could apply, the account must be emptied by the earliest (§ 1.401(a)(9)-5(e)(1)). Annual distributions continue during the ten years. The regulations state that a distribution is due for the calendar year of the eligible designated beneficiary’s death and must be paid to that person’s beneficiary to the extent it was not already taken (§ 1.401(a)(9)-3(c)(4)).

More than one beneficiary

Eligibility can be lost through the company a beneficiary keeps. If the owner has more than one designated beneficiary and at least one is not an eligible designated beneficiary, the owner is treated as having no eligible designated beneficiary (§ 1.401(a)(9)-4(e)(2)(i)). The regulation states three exceptions:

• Separate accounts. The rules are applied separately to each beneficiary’s share when the shares are held in separate accounts that meet the accounting requirements of § 1.401(a)(9)-8(a).
• The owner’s minor child. If any designated beneficiary is the owner’s child who had not reached majority at death, the owner is treated as having an eligible designated beneficiary even though other beneficiaries are not eligible (§ 1.401(a)(9)-4(e)(2)(ii)).
• Applicable multi-beneficiary trusts. A see-through trust for one or more disabled or chronically ill individuals can preserve life-expectancy treatment for them even though the trust has other beneficiaries, if its terms give no one else any right to the account until those individuals have died (§ 401(a)(9)(H)(iv); § 1.401(a)(9)-4(e)(2)(iii) and (g)). The requirements are on the trust-as-beneficiary page.

Who is named on the account is decided by the beneficiary form; see the beneficiary-designation audit.

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