It’s been over four years since the SECURE Act upended the rules for beneficiary IRA required minimum distributions (RMDs), and there’s still plenty of confusion about the new rules. The IRS did give us proposed SECURE Act regulations in February 2022, but those rules still haven’t been finalized. They have also raised a lot of new questions.
Here’s a cheat sheet on how the rules currently stand for IRAs inherited after 2019. (Pre-SECURE Act rules apply for IRAs inherited before 2020.)
Two Important Questions
First, we always need to answer two important questions:
Traditional IRA Owner Died Before Required Beginning Date OR
Roth IRA Owner Died At Any Time
EDB: A non-surviving spouse EDB can elect to stretch RMDs over her life expectancy or have the 10-year payment rule apply. If the 10-year rule is elected, the entire account must be emptied by 12/31 of the 10th year following the year of death. However, no annual RMDs are required during the 10-year period. Note: There are different rules for surviving spouse EDBs who inherit after 2023.
NEDB: The 10-year rule applies, but no annual RMDs are required.
NDB: The 5-year rule applies. So, the entire account must be emptied by 12/31 of the 5th year following the year of death, but no annual RMDs are required during the 5-year period.
Traditional IRA Owner Died On or After Required Beginning Date
EDB: Stretch RMDs apply. But if the EDB is older than the deceased IRA owner, the EDB can use the deceased person’s older life expectancy in calculating RMDs. (However, the inherited IRA must be emptied when the EDB’s life expectancy runs out.)
NEDB: The IRS proposed regs say that both the 10-year rule applies and annual RMDs during the 10-year period are required. However, because of widespread confusion, the IRS has waived the annual RMD requirement for 2021, 2022, 2023 and 2024 in this situation.
NDB: AnnualRMDs must continue over the deceased IRA owner’s remaining single life expectancy had he lived (the “ghost rule”).
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Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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