Five-Year Rule

DEFINITION of 'Five-Year Rule'

If a retirement account owner dies before the required beginning date for receiving distributions, the beneficiary may distribute the inherited assets over his/her (the beneficiary's) life expectancy or distribute the assets under the five-year rule. Under the five-year rule, the assets must be distributed by December 31 of the fifth year since the retirement account owner's death.

BREAKING DOWN 'Five-Year Rule'

The five-year rule does not apply if the IRA owner dies after the required beginning date (RBD).

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RELATED FAQS
  1. Does the five-year rule apply if a non-spouse inherits an IRA after the required ...

    The five-year rule applies only when the IRA owner dies before the required beginning date (RBD). If the IRA owner dies after ... Read Answer >>
  2. If an IRA owner dies after starting required minimum distributions (RMD) but the ...

    If the IRA owner dies after the required beginning date (RBD) and his/her beneficiary is his/her spouse, the spouse beneficiary ... Read Answer >>
  3. Where can I find information on how to distribute my deceased parent's assets?

    Related information can be found in IRS publication 590. See page 32 (bottom right hand corner) and page 35. If the trust ... Read Answer >>
  4. What are the tax implications for a disabled recipient of an inherited IRA?

    I inherited an IRA from my mother who was 89. I was 66 when she past. I saw a reference to the rules of taxes being different ... Read Answer >>
  5. Can IRAs be held jointly by spouses?

  6. How long does an IRA beneficiary have to take an RMD after the IRA holder dies?

    Let's suppose the IRA holder, we'll call him Tom, dies in 2008. If Tom was required to take a required minimum distribution ... Read Answer >>
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