Topic: Inherited IRAs
Subtopic: Minor Children and Eligible Designated Beneficiaries
Authority: IRC § 401(a)(9); Treas. Reg. §§ 1.401(a)(9)-4 and 1.401(a)(9)-5 (Final RMD Regulations)

The Question

An advisor asked:

An IRA owner names his partner's 13-year-old child as the beneficiary of his traditional IRA.

Since the beneficiary is a minor, does the special rule for minor children apply so that the 10-year period begins when the child reaches age 21?

Also, I thought the age of majority was 18. Did that change?

The Answer

No.

The special rule for minor children applies only to a child of the IRA owner. A grandchild, stepchild, niece, nephew, partner's child, or any other minor beneficiary does not qualify simply because the beneficiary is under age 21.

In this example, the partner's child is a designated beneficiary, but not an Eligible Designated Beneficiary (EDB). Therefore, the beneficiary is subject to the normal 10-year rule.

Assuming the IRA owner died before the required beginning date, the account must be fully distributed by December 31 of the tenth year following the year of death. No annual RMDs are required during Years 1 through 9.

The confusion regarding age 18 versus age 21 is understandable.

When the SECURE Act was enacted, the proposed regulations referred to the "age of majority," causing many practitioners to look to state law. The final RMD regulations simplified the rule by providing that, for this purpose, a child generally ceases to qualify upon reaching age 21.

However, that rule applies only when the beneficiary is the IRA owner's child.

Why It Matters

One of the most common inherited IRA mistakes is assuming that any minor beneficiary receives the special treatment available to a minor child of the IRA owner.

That is incorrect.

The beneficiary's relationship to the IRA owner—not simply the beneficiary's age—determines whether the beneficiary qualifies as an Eligible Designated Beneficiary.

Appleby's Takeaway

✓ A minor is not automatically an Eligible Designated Beneficiary.

✓ The special minor-child rule applies only to the IRA owner's child (including an adopted child).

✓ A stepchild or a partner's child does not qualify under the minor-child exception.

✓ For purposes of the SECURE Act's minor-child exception, the applicable age is generally 21, not 18.

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