IRS NEW and FINAL Regulations on RMDs
The SECURE Act of 2019 changed the rules governing inherited IRA accounts, particularly for non-spouse beneficiaries. More recently, in July 2024, the IRS introduced new instructions that clarify RMDs for beneficiaries who inherited retirement accounts in recent years as non-spouse beneficiaries. These changes can substantially impact your financial situation, and it's crucial to understand them. We're here to break down the key updates and ensure you're well-informed and empowered to maximize your inherited IRA account.
If the decedent was already taking RMDs, the inheritor must continue.
Non-spouse beneficiaries inheriting accounts after 2019, where the original owner was not taking RMDs, are exempt from annual RMDs but must drain the inherited account within ten years of the original owner's death.
If the original account owner took RMDs before their death, non-spouse beneficiaries who inherited after 2019 can start taking RMDs in 2025 without penalty. They must empty the account by the end of the tenth year after the original owner's death.
Exceptions to the 10-year rule include minor children of the descendent, beneficiaries who are disabled or chronically ill, and those who are not more than ten years younger than the decedent.
When managing inherited retirement accounts as a non-spouse beneficiary, consider your current tax bracket to avoid withdrawals that could increase your tax liability. Stagger withdrawals evenly over the 10-year distribution period to minimize taxes rather than taking a large sum in the final year. Additionally, plan strategically for ROTH accounts, which require full distribution within ten years.
Please note that this information is for educational purposes only and should not be considered personalized financial advice. Please consult a tax professional for guidance regarding your specific needs.