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).