Q: On page 2 of IRAs at 70½: Barry Picker's Guide to Making Timely IRA Decisions, you state that "...it's possible that the identity of the beneficiary and the designated beneficiary are different". How would this come about? Can I use this to my advantage? My wife is 15 years younger than me. My kids are my beneficiaries. I would like to have my wife as the measuring life to compute Minimum Required Distributions (MRD). Can this be done?

A: This is not an election, this is usually the result of either a screw up, or a change in beneficiaries AFTER the Required Beginning Date (RBD), IF it is to your DISadvantage. I see where you are coming from, and that is that your spouse, although being more than ten years younger than you, is exempt from the Minimum Distribution Incidental Benefit (MDIB) rule, so your MRD's will be smaller if your spouse is your beneficiary.

Let's say that before your RBD you name your spouse as your beneficiary and compute your required minimum based upon the joint life of you and your spouse. Then, after the RBD, you change the beneficiaries to your children. You still must treat the account as if your spouse is the beneficiary. Your thinking is that this is your advantage since your MRD's are now smaller while you are alive. Even if your thinking were correct, the problem is that when you die, your children must use your SPOUSE'S life expectancy to take their minimum distributions. That could be giving up a lot of tax deferral over the years. But you won't get smaller MRD's even when you are alive. The MDIB exception applies if your wife is your beneficiary. You lose that if she is not the beneficiary, even though her life is the measuring life. So you get the raw end all the way.

So to answer your initial question, one example of how the beneficiary and designated beneficiary can be different, is if you change your beneficiary to a person with a longer life expectancy, after your RBD.