If you’re planning to inherit a retirement account at some point, this video will help you avoid paying unnecessary taxes! It all depends on what type of beneficiary you are and what you choose to do next.

The SECURE Act (circa 2019) brought with it a number of changes to the financial landscape. One of the most significant changes was to how inheritors of retirement accounts need to distribute funds from those accounts. Until recently, there was a lot of confusion.

0:55 – What are Required Minimum Distributions (RMDs)?
1:27 – What is the Required Beginning Date (RBD)?
2:26 – Categories of Beneficiaries
2:50 – Eligible Designated Beneficiary (EDB)
6:07 – Non-Eligible Designated Beneficiary (NEDB)
8:36 – Not Designated Beneficary (NDB)
9:48 – Why does this matter? Taxes that’s wise
11:10 – Conclusion

#taxes #inherited #ira #rmd #beneficiary #retirement…(read more)

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Retirement accounts are a vital source of income for millions of Americans who have worked hard over the years to save for their golden years. However, leaving these accounts to our loved ones after we pass away can have serious tax implications if we don’t understand the required minimum distribution (RMD) rules.

An inherited individual retirement account (IRA) is a retirement account that’s passed down to a beneficiary after the account owner passes away. If you’re the beneficiary of an inherited IRA, you must take RMDs that are based on your life expectancy, starting in the year after the account owner’s death. If you don’t take the required RMDs, you could face a penalty of 50% or more of the amount not taken.

The RMD rules for inherited IRAs can be complicated, but they’re essential to understand if you want to save your loved ones from potential tax nightmares down the road. Here’s what you need to know:

• RMDs must begin by December 31st of the year after the account owner’s death.

• The RMD amount is based on the beneficiary’s life expectancy, which is calculated using the IRS’s Single Life Expectancy Table.

• The RMD for the first year after the account owner’s death is calculated by dividing the account balance on December 31st of the current year by the beneficiary’s life expectancy.

• For the subsequent years, the RMD is calculated by dividing the account balance as of December 31st of the previous year by the remaining life expectancy in the IRS’s Single Life Expectancy Table.

It’s also important to note that the RMD rules for inherited IRAs vary depending on the beneficiary’s relationship to the account owner. Spouses who inherit an IRA can choose to treat the account as their own, which means they’re subject to the same RMD rules as the original account owner. Non-spouse beneficiaries, on the other hand, must begin taking RMDs by December 31st of the year after the account owner’s death, regardless of their age. They’re also subject to more stringent RMD rules that require them to empty the account within 10 years after the account owner’s death, with some exceptions for minor children and beneficiaries who qualify as “eligible designated beneficiaries”.

The penalties for failing to take the required RMDs from an inherited IRA can be severe. As we mentioned earlier, you could face a penalty of 50% or more of the amount not taken. For example, if your RMD was $10,000 and you failed to take it, the penalty would be a whopping $5,000.

So how can you avoid these penalties and ensure that your loved ones don’t face unnecessary taxes on their inheritance? The key is to plan ahead and work with an experienced financial and/or tax advisor who can help you navigate the complexities of inherited IRA RMD rules, and ensure that you’re taking the necessary steps to avoid penalties, while also maximizing your beneficiaries’ benefits.

In summary, understanding the RMD rules for inherited IRAs is crucial for anyone who wants to protect their loved ones and maximize the value of their retirement savings. By working with a knowledgeable advisor and taking the necessary steps to meet RMD requirements, you can avoid costly penalties and ensure that your beneficiaries receive the full benefits of the IRA without paying more taxes than necessary.