Broker Check

2024 Beneficiary IRA Updates

April 22, 2024

The 10-year rule saga continues with another extension of penalty relief for 2024 for beneficiaries of some inherited IRAs.  The IRS has also indicated a final resolution may be coming soon that “will apply” for years beginning on or after 1/1/2025.

In our letter at the beginning of the year, we provided the following information:

When the SECURE Act passed in 2019, it changed the rules on distributions from inherited retirement accounts by creating the new “10-year rule”. Under that rule, most non-spouse beneficiaries of someone who died in 2020 or later must fully empty the inherited IRA within 10 years of the death of the owner. The IRS later clarified that beneficiaries must also continue taking RMDs themselves during that 10-year period, but only if the owner died after their own Required Beginning Date for RMDs. Shortly afterwards, the IRS chose to waive penalties for not taking those RMDs in both 2021 and 2022, and then again for 2023.

As of now, those penalty waivers do not apply for 2024, and it’s expected the IRS will require those RMDs to be taken from the inherited account this year. Given the IRS’s history, it might be prudent to wait to take that RMD in case the IRS does provide more clarity on this rule. This is especially true for those clients whose cash flow needs or tax situation would suggest that delaying distributions is more appropriate. There is no expectation that the requirement to empty the account within 10 years will be changed, so keep that date in mind as you plan for future distributions from the account.

The current IRS guidance now provides the planning information needed for 2024 distribution decisions.  Click here to review a more detailed description of the newly issued guidance as well as some thoughts on why some may want to take a distribution anyway.

As always, we thank you for your partnership!

The Hollander Group

Private Wealth Management