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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.
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Investopedia explains '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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If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds.
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To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
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