Yes, a disabled beneficiary can stretch an inherited IRA over a lifetime. An inherited IRA is an account received after the owner dies, and a qualifying disability allows life-expectancy payments instead of the 10-year payout. Congress ended the lifetime stretch for most non-spouse beneficiaries when owners died after Dec.
31, 2019. According to the IRS, those beneficiaries must empty the account by Dec. 31 of the 10th anniversary year in the RMD FAQs. Disability creates a narrow exception to that deadline.
Table of Contents
- What counts as disabled?
- How does the exception compare to the 10-year rule?
- How are yearly payments figured?
- Where does the stretch stop?
What counts as disabled?
Disability has a strict tax meaning. Sheehan Phinney cites the test in IRC Section 72(m)(7) in its analysis of disabled beneficiaries. The test requires inability to do substantial gainful activity because of a medical impairment expected to cause death or last indefinitely. Timing matters more than later paperwork.
The disability must exist and be documented as of the owner's date of death. Sheehan Phinney reports that a later disability determination does not apply retroactively. Final regulations ease proof in two cases. Ed Slott and Company reports the IRS approach from July 18, 2024:.
- Social Security disability recipients count as automatically disabled.
- Beneficiaries under 18 can show severe functional limitations instead of inability to work.
How does the exception compare to the 10-year rule?
The 10-year rule forces faster payouts and larger taxable amounts in fewer years. Life-expectancy payments spread taxable income across decades. That difference can preserve growth for a beneficiary with lifelong needs.
A disabled individual is one of five eligible designated beneficiaries exempted from that 10-year rule. IRS Publication 590-B lists this exempt group. The status must be fixed at death, so planning cannot be added later.
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How are yearly payments figured?
Each year requires a minimum distribution. According to the IRS, the beneficiary divides the prior Dec. 31 balance by the Single Life Table factor in Table I in the life-expectancy tables.
The first factor reflects the beneficiary's age. Later years use a simple countdown. Subtract one from the prior divisor each year. A current balance divided by a smaller divisor sets that year's required amount.
Where does the stretch stop?
Death of the disabled beneficiary ends lifetime treatment. Ed Slott and Company notes that a successor beneficiary must empty the remaining account within 10 years. That second 10-year period prevents a multi-generation stretch.
Paperwork is lighter than many expect. For IRAs, the IRS waived filing disability certification with the custodian, while plan beneficiaries need only a brief statement, according to Ed Slott and Company. Keep medical records and Social Security letters with tax files anyway.
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