Understanding EDB, NDB, and NEDB: What to Know When Inheriting an IRA

Inheriting an IRA can be a powerful financial opportunity—but the rules can get confusing fast. If you’re the beneficiary of an IRA, your distribution timeline depends heavily on your classification under current IRS rules. Are you an EDB, NDB, or NEDB? If you’re not sure what those acronyms mean, don’t worry—we’re here to break them down for you.

‍

What Is an EDB (Eligible Designated Beneficiary)?

An Eligible Designated Beneficiary is someone who qualifies for special treatment under the SECURE Act. This status allows you to stretch distributions over your life expectancy, which can help reduce your tax burden and preserve the account’s long-term growth potential.

Who qualifies as an EDB?

• A surviving spouse
• A minor child of the original IRA owner (until they reach the age of majority)
• A disabled individual
• A chronically ill individual
• A beneficiary not more than 10 years younger than the IRA owner

Distribution Rules:

EDBs may take required minimum distributions (RMDs) over their life expectancy. Once a minor child reaches legal adulthood, the 10-year rule kicks in.

Special Rules for Spouse Beneficiaries

Spouses have the most flexibility when it comes to inheriting an IRA. In fact, they have three main options:

1. Treat the IRA as their own
   The surviving spouse can move the inherited IRA into their own IRA account. This is often the best choice if the spouse is under RMD age and wants to delay required withdrawals.
2. Remain a beneficiary
   The spouse can keep the IRA as an inherited IRA and take RMDs based on their own life expectancy. This option may make sense if the spouse is younger than 59½ and needs to access the funds sooner (since it avoids the 10% early withdrawal penalty).
3. Rollover the inherited IRA into their own retirement plan

This treats the account like their own from the start and follows normal IRA contribution and distribution rules.
Because spouses can essentially "step into the shoes" of the original account holder, they have significant strategic advantages when it comes to timing withdrawals and maximizing tax efficiency.

‍

What Is a NEDB (Non-Eligible Designated Beneficiary)?

A Non-Eligible Designated Beneficiary is an individual who doesn’t qualify as an EDB. Common examples include:

• Adult children or grandchildren
• Siblings
• Friends or more distant relatives

Distribution Rules:

NEDBs must follow the 10-Year Rule, meaning the entire inherited IRA must be distributed by December 31 of the 10th year following the original owner’s death. Annual RMDs aren’t required during those 10 years (if the owner passed before beginning annual Required Minimum Distributions), but the entire balance must be withdrawn by the end of that window.
a Non-Eligible Designated Beneficiary (NEDB) must take annual RMDs if the account owner died after their Required Beginning Date (RBD).

Here’s how it works:

Key Rules:

• RBD = Required Beginning Date, typically April 1 of the year after the IRA owner turns 73.
• If the owner dies after their RBD, the NEDB is required to take annual RMDs based on the deceased owner’s life expectancy (the “ghost rule”) through year 9.
• The entire account must still be emptied by the end of the 10th year following the year of death.
• Years 1–9: Annual RMDs required.
• Year 10: Entire balance must be distributed.

This differs from the rule if the owner died before their RBD, in which case no annual RMDs are required, but the entire account must still be distributed by year 10.

‍

What Is a NDB (Non-Designated Beneficiary)?

A Non-Designated Beneficiary isn’t a person at all. These beneficiaries are typically:

• Estates
• Charities
• Certain trusts (if they don't qualify as “look-through”)

Distribution Rules:

• If the IRA owner died before their Required Beginning Date (RBD): the account must be fully distributed within 5 years.
• If the IRA owner died after their RBD: distributions must be made over what would have been the original owner’s remaining life expectancy.

‍

Why It Matters

Each beneficiary's classification comes with its own timeline and tax implications. Understanding where you fall helps you make smarter decisions about how and when to withdraw funds, and how to preserve as much of the IRA’s value as possible.

‍

Final Thoughts: Don’t Go It Alone

Because inherited IRA rules can significantly impact your tax situation and financial planning, it’s important to consult with a qualified CPA before making any moves. They can help you understand your obligations and avoid unnecessary tax consequences.

Have questions about inheriting an IRA or need help navigating the rules? Mountain West IRA is here to help.
📞 Call us at 866-377-3311 or
📅 Schedule a free consultation today to get started!