Do you plan to inherit an IRA? If so, this is a must-watch video as the rules that mandate inherited IRAs have recently changed in 2022. You will not have mandated RMDs during the SECURE Act’s 10-year window…
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There have been a lot of rule changes in inherited IRA space over the last few years with the passing of the SECURE Act.
As we sit here in 2022, the changes keep coming…
We previously understood the SECURE Act’s 10 year rule as having no required minimum distributions except for having to withdraw the full IRA balance by year 10.
Now, however, with new IRS guidance in 2022, this 10 year rule changes drastically.
You will now have ongoing, annual RMDs.
Watch this video to learn more…
#InheritedIRA #retirementplanning #estateplanning
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Inheriting an IRA in 2022 will be a complicated process, but one that could provide you with a substantial financial windfall. With the right planning, you can maximize the benefits of your inherited IRA and ensure that you are able to make the most of the tax advantages that come with it. Here are some things you need to know about inheriting an IRA in 2022.
First, you should understand the rules for inherited IRAs. Generally, if you inherit an IRA from a spouse, you can treat it as your own and make contributions to it. However, if you inherit an IRA from another person, you must take distributions from the account according to the rules of the deceased’s estate. Additionally, you cannot make any contributions to the account.
Second, you should be aware of the tax implications of inheriting an IRA. Generally, inherited IRAs are subject to income tax. This means that you must pay taxes on any distributions you receive from the account. Additionally, you may be subject to estate taxes if the value of the account is above a certain threshold.
Third, you should understand the different types of inherited IRAs. There are two main types of inherited IRAs: Traditional IRAs and Roth IRAs. Traditional IRAs are subject to income taxes on distributions, while Roth IRAs are not. Additionally, Roth IRAs have different rules for required minimum distributions than Traditional IRAs.
Fourth, you should understand the rules for required minimum distributions. Generally, you must begin taking required minimum distributions from an inherited IRA by December 31 of the year after the year of death of the original account holder. The amount of the required minimum distribution depends on the age of the deceased and the value of the account.
Finally, you should consider the potential benefits of an inherited IRA. Generally, an inherited IRA can provide you with a substantial financial windfall. Additionally, you may be able to take advantage of the tax advantages that come with an inherited IRA, such as avoiding early withdrawal penalties and taking advantage of tax-free growth.
Inheriting an IRA in 2022 can be a complicated process, but with the right planning, you can maximize the benefits of your inherited IRA and ensure that you are able to make the most of the tax advantages that come with it. Understanding the rules for inherited IRAs, the tax implications, the different types of inherited IRAs, and the rules for required minimum distributions can help you make the most of your inherited IRA. Additionally, understanding the potential benefits of an inherited IRA can help you ensure that you are able to make the most of the financial windfall.
UPDATE: The IRS later updated that inherited RMDs (per the 10 year rule) were not required in 2022 but will be required in 2023 and beyond…
Holy crap! I skipped this note in September. We studied and 'knew' all the RULES after a beneficiary IRA inheritance from a death in 2020. The IRS will puke a lot of goodwill if the agency comes after RMDs and tax penalties for 2021 — when they put out a rule in 2022. Let's hope sober heads prevail. Thanks Eric!!
Under final IRS regulations, penalties and RMD's won't kick in until 2023, at least for non-eligible designated beneficiaries and where the IRA owner died in 2020. I just went through this discussion with Fidelity. The key point I discovered was that even if you didn't take the RMDs for 2021 and 2021 (most people didn't), the IRS did not extend the 10 year rule to start as of 2023, rather it still starts in the year following the death. Therefore, if someone passed away in 2020 and you take your first RMD in 2023, the remainder of the IRA still has to be withdrawn by Dec 31, 2031. Also, there is no "catch-up" RMD to make up for the RMD's you did not take in 2021 and 2022, hence why the IRS kept the original 10 year window and did not extend it. For the nitty gritty see: On October 7th, 2022, the IRS released Notice 2022-53 announcing final regulations will be forthcoming and will apply (at earliest) to the 2023 distribution year. https://www.irs.gov/forms-pubs/guidance-for-certain-required-minimum-distributions-rmds-for-the-2021-and-2022-tax-years
I've been adding to my Roth Ira both through conversions and contributions for years now. I still have a traditional Ira as well as a SEP. I'm still working but semi retired and have not started taking Social Security yet. My full retirement age will come in December of 2023. I intend to at least wait until then or possibly put off collecting until later, maybe age 70. At what point does it make sense to stop making conversions and contributing to my Roth Ira? The value of my Roth has surpassed the value of my traditional Ira and SEP in the last year. It's not a huge difference and eventually I expect what's left to go to my daughters or their children. Thanks in advance for any input that you might have. FYI, I'm not making very much income these days, just trying to offset living expenses here in NY at 65. I own my house with no mortgage and would have to guess that the current value of all Ira's along with some taxable accounts work out to about 15-16 times my annual need for income. That's using the current value including the market decline. I have about a 60-40 balance of stock to bonds with some REIT index funds.
My mom passed away im 24. Getting some iras trying to figure out what to do
thank u
In the video if you inherited an IRA in 2020 did you take an RMD an annual RMD in 2021? What if you didn't? I know you said to wait for guidance from whom? I know it's the IRS but who gets the information? CPA's, estate planning attorneys? Why does this information seem so secretive? Congress eliminated the stretch IRA for non spouse beneficiaries so most assumed everything needed to be withdrawn by 10th year with no RMDs. If Ed Slott and others don't know what to do how does the average citizen? So my question is when will information be disseminated and who can be contacted? Thank you.
I inherited both a Roth and traditional IRA from my uncle last year (2021) when I was 58 yo.
Can you be younger than 591/2 yo and still be required to take an RMD?
So glad I watched this. Thank you.
Inherited IRA from someone who died in 2019, therefore following stretch rules. Problem is that the additional ordinary income is causing 85% of Social Security to be taxed too. What can be done to reduce taxes as I believed taxes will rise going forward? I have my own IRA that now requires a RMD. Are Roth conversions on my IRA my only option?
What about for spouses? Same rules?
Wouldnt using a RMD calculator from a major brokerage company give you the correct amount once you enter the variables?
Other than the footnote in one of the slides at the beginning, I don’t recall you mentioning that these rules apply to non-spouse beneficiaries and spouse beneficiaries have their own set of rules. Sorry if I overlooked it. They’ve made it so complicated that we almost need a flowchart to figure which rules to apply, based on our set of circumstances. As a non-spouse beneficiary who inherited an IRA prior to 2020, my understanding is the only change for me is that I will need to use the new revised IRS table to find the new factor to use as my beginning divisor and subtracting 1 from it for each subsequent year thereafter.
Based on your example, there would be a big RMD in the tenth year since the first nine RMDs were based on the recipient's age. To avoid a big tax hit in the tenth year wouldn't it be better to take roughly equal withdrawls each year? That would be 1/10th of the balance the first year, 1/9th the second year, 1/8th the third year, etc.
Would it be advisable for someone with a $200K IRA, who is 80+ years old, and knows they are going to pass away soon (cancer, for example), to withdraw all funds from the IRA, and deposit the money into their family Trust so that their sons can inherit the money tax free, instead of having them deal with the tax laws of inherited IRA’s? Especially if one son lives overseas and does hasn’t files US taxes in decades?
They need to hurry up and finalize the rules. What happens if someone inherits an INHERENTED IRA????
So if I inherited ira and was taking RMD (deceased owner died before 2020 at 75) nothing really changes.
What has changed for beneficiaries of someone who died previous to 2020? I am 73, taking RMDs from my deceased partner’s IRA and ROTH.
If you inherit the IRA from a spouse, and roll it over into your own IRA, does this 10 year rule still apply?
Does the new rmd rule apply to 401K