Ready to get started?
If you’re ready to start planning for a brighter financial future, Rockbridge is ready with the advice you need to achieve your goals.
July 23, 2024
Tax
Prior to 2019, most beneficiaries of Inherited IRAs could stretch out Required Minimum Distributions (RMDs) over their lifetime. However, the first SECURE Act eliminated this benefit and required that most non-spouse beneficiaries empty inherited accounts within 10 years. This change led to considerable confusion, most notably, whether annual RMDs were necessary during this 10-year period. As a result of the confusion, the IRS waived RMDs from Inherited IRAs for the past three years. However, earlier this month the IRS issued final regulations for anyone that inherited an IRA in 2020 and thereafter.
IRS Final Regulations, required for any non-spousal IRA inherited in 2020 and later:
For inherited IRAs requiring distributions since 2020, the 10-year clock has already started, however the IRS waived all penalties for failure to take RMDs through 2024 due to previous regulatory uncertainty.
For beneficiaries that inherited multiple IRAs:
For beneficiaries that inherited an IRA prior to 2020:
Important Takeaways:
Whether you’ve recently inherited an IRA or inherited an IRA prior to 2020, it’s important to understand your obligations and strategize accordingly.
Note that a separate set of rules applies to beneficiaries of Inherited IRAs who are a surviving spouse, minor child, person not less than 10 years younger than the decedent, or persons that are disabled or chronically ill.
Given the potential tax implications and the complexity of these rules, consulting with your Rockbridge Financial Advisor and tax professionals is highly recommended to minimize your tax burden and ensure compliance with IRS regulations to avoid penalties up to 25%.
If you’re ready to start planning for a brighter financial future, Rockbridge is ready with the advice you need to achieve your goals.