Practical Points

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
• Pages: 15-18

15

PRACTICAL POINTS

1. The author uses the term “beneficiary” instead of “designated

beneficiary” throughout this guide. If the beneficiary is an in-

dividual, then the beneficiary is considered to be a “designated

beneficiary.”

2. A trust is beneficiary, not a designated beneficiary. However, if

strict IRS compliance rules are satisfied, then the beneficiary of

the trust is considered to be a “designated beneficiary.”

3. Designated beneficiary status is necessary in order to use life

expectancy payout periods under the IRS rules.

4. An “inherited IRA” is an IRA that is payable to a nonspouse

designated beneficiary. The author uses nonspouse beneficiary in-

stead of nonspouse designated beneficiary throughout this guide.

5. A designated beneficiary is an individual who is a beneficiary of

an IRA owner’s account as of the date of death of the IRA owner.

An estate, charity, or a trust is not considered a designated benefi-

ciary. However, as previously mentioned, if a trust satisfies certain

strict IRS compliance requirements, then the beneficiary of the

trust is generally considered to be a designated beneficiary. This

also assumes that the trust is worded properly.

6. According to the IRS rules, if the beneficiary survives the IRA

owner and remains a beneficiary as of September 30 of the year

following the IRA owner’s year of death, then the life expectancy

of the designated beneficiary can be used in determining the

required minimum distributions from the deceased IRA owner’s

account. The author refers to the period between the IRA own-

er’s date of death and September 30 of the year following the

IRA owner’s death as the “standard gap period.” The IRS takes

a realistic position and states that if the beneficiary of the IRA

owner dies during the “standard gap period,” then that beneficiary

continues to be treated as the designated beneficiary for purposes

of determining the distribution period. The payments would then

be made over the applicable distribution period to the beneficia-