IRS Final Regulations Loosen Definition of "Eligible Designated Beneficiary"
On July 18, 2024, the IRS released final regulations under the SECURE Act that adjust how required minimum distributions (RMDs) apply to inherited retirement accounts. One of the most significant updates involves Eligible Designated Beneficiaries (EDBs)—a group that retains the ability to stretch distributions over their lifetime, rather than following the shorter 10-year payout rule.
While the final regulations do not add new EDB categories, they make it easier for more individuals to qualify under existing definitions. For families managing inherited IRAs or workplace retirement accounts, these updates could significantly reduce tax burdens and preserve account value.
Background: SECURE Act and Beneficiary Categories
The 2020 SECURE Act created two main types of individual beneficiaries:
- Eligible Designated Beneficiaries (EDBs): These individuals can take RMDs over their life expectancy.
- Non-EDBs: These individuals must withdraw all assets by the end of the 10th year after the original account holder’s death.
Before 2020, almost any individual beneficiary could stretch distributions across their own life expectancy. The SECURE Act removed that option for most people, leaving it only for those classified as EDBs.
Who Qualifies as an Eligible Designated Beneficiary?
To qualify as an EDB under the SECURE Act, the beneficiary must be one of the following:
- The surviving spouse of the account owner
- A minor child of the account owner
- A disabled individual
- A chronically ill individual
- A person not more than 10 years younger than the account owner
The new IRS regulations do not expand this list, but they adjust the definitions to include more people within these categories.
Key Updates from the Final Regulations
The final rules clarify how to apply EDB criteria in real-life situations. Here are the main changes that will benefit more IRA and plan beneficiaries:
1. Expanded Definition of "Child" for Minor Beneficiaries
A minor child of the account owner qualifies as an EDB. The IRS now confirms that the term “child” includes legally adopted children, stepchildren, and foster children. The child must still be under age 21 at the time of the account owner’s death.
This clarification helps more families—especially blended or adoptive families—ensure that minor children can qualify for lifetime RMD treatment, at least while they remain under age 21.
Note: Once a child turns 21, they are no longer considered a minor under this rule and must switch to the 10-year withdrawal schedule unless they qualify in another way (e.g., by being disabled).
2. New Disability Standard for Young Beneficiaries
The standard definition of disability under the SECURE Act is strict. An individual is considered disabled if they cannot engage in any substantial gainful activity due to a physical or mental condition expected to last indefinitely or result in death.
The final regulations ease this standard for beneficiaries under age 18. For young people, the IRS allows a broader definition of disability: the impairment must result in severe functional limitations, not necessarily prevent all work.
This change helps children with serious conditions qualify as EDBs more easily—and stay qualified after turning 21.
3. Automatic EDB Status for Social Security Disability Recipients
If a beneficiary has already been approved for Social Security Disability Insurance (SSDI), the IRS will automatically recognize them as an EDB. This eliminates the need for further evaluation and speeds up the process for claiming stretch treatment.
This is an important simplification for families and advisors handling estates with disabled beneficiaries.
4. Simplified Documentation Requirements for IRAs and Plans
Originally, the IRS required detailed documentation of disability or chronic illness to be submitted to the IRA custodian or plan administrator by October 31 of the year after the account holder's death. Failure to meet this deadline could disqualify a beneficiary from EDB status.
The new rules remove or soften this requirement:
- For IRAs: The IRS has completely waived the documentation deadline. No formal certification is now required.
- For employer plans: Documentation must still be provided, but it does not need to be detailed. Medical records or in-depth reports are not required. A basic certification is enough.
In addition, beneficiaries who inherited assets between 2020 and 2023 now have until October 31, 2025, to submit any required documentation for plan accounts.
Summary of Practical Impacts
The IRS did not change the five EDB categories, but it loosened the criteria within them to allow broader access. These updates benefit:
- Blended families with stepchildren or adopted children
- Young disabled individuals with serious conditions
- Beneficiaries already approved for SSDI
- IRA inheritors who missed previous certification deadlines
Advisors and families should revisit prior beneficiary designations and reevaluate whether beneficiaries now qualify as EDBs under the clarified rules.
FAQ Eligible Designated Beneficiary Rules
Who qualifies as an Eligible Designated Beneficiary?
An EDB is a spouse, minor child of the account owner, disabled person, chronically ill person, or someone no more than 10 years younger than the account holder.
Do stepchildren qualify as minors under the EDB rules?
Yes. The IRS now includes stepchildren, adopted children, and foster children in the definition of “child” for EDB status.
What disability standard applies for young beneficiaries?
If the beneficiary is under 18, the IRS uses a less strict standard: the condition must cause severe functional limitations rather than full inability to work.
Do I need to submit medical documentation to the IRA custodian?
No. For IRAs, the documentation requirement has been waived. For employer plans, a simple certification is enough.
What if the certification deadline was missed in a past year?
The IRS allows beneficiaries who inherited accounts between 2020 and 2023 to submit documentation by October 31, 2025, and still qualify.
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.