Any individual can be your calculation beneficiary, regardless of his or her age. * However, there is a rule called the Minimum Distribution Incidental Benefit (MDIB) that places a maximum on the life expectancy divisor used. This rule ensures that the minimum distribution payment is not too small. It is applied only if you have a nonspouse calculation beneficiary. The maximum divisors are included in Appendix II. Under the MDIB rule, a nonspouse calculation beneficiary can be a maximum of 10 years younger than you.
* The calculation beneficiary must be the primary beneficiary with the shortest life expectancy.
For married couples, designating your spouse as the calculation beneficiary and your ultimate heirs (i.e., children or a trust for the benefit of the children) as contingent beneficiaries is the common choice. This allows for the most flexibility and continued tax deferral for your spouse.
Naming a Trust as a Beneficiary:
Instead of naming individual beneficiaries, it may make sense to name a trust as primary or contingent beneficiary. Trusts have many uses in estate planning. They can protect assets against creditors, limit distributions to young children, or provide professional asset management.
Naming the Beneficiary of a Trust as a Calculation Beneficiary:
If you have a trust and would like to name a calculation beneficiary, the beneficiary with the shortest life expectancy named in the trust would be the calculation beneciary. His or her life expectancy would be used in the calculation of your payments. But in order for a trust beneficiary to be used as a calculation beneficiary, you must provide us with a copy of the trust or a certification concerning the beneficiary scheme under the trust, updates upon any changes in the future, and the trust must fulfill all of the following:
- The trust must be valid under state law;
- The trust must be irrevocable or become irrevocable no later than the date of the participant's death; and
- The beneficiary of the trust must be identified in the trust document.
A trust's beneficiary cannot be named as calculation beneficiary if it does not fulfill all of the requirements listed above. If you have already started receiving payments and would like to substitute a trust beneficiary as the calculation beneficiary:
- The trust must meet all of TIAA-CREFs requirements listed above;
- The present calculation beneficiary must still be alive; and
- The beneficiary in the trust must have a shorter life expectancy than the existing calculation beneficiary.