If you are the named beneficiary of an IRA (Individual Retirement Accounts) or you own an IRA yourself and have named beneficiaries, this topic affects you. The SECURE ACT shortened the time period beneficiaries are allowed to delay taking money out and paying income taxes. With an update earlier this year, the IRS added more confusion to distribution rules for beneficiaries. This video goes over all of this.
Show Notes:
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As of January 1, 2020, the Internal Revenue Service (IRS) has made changes to the 10-year rule for inherited IRAs. This rule governs how long an inherited IRA must be held before it can be withdrawn without penalty.
The 10-year rule states that a beneficiary of an inherited IRA must withdraw all funds from the account within 10 years of the original owner’s death. This rule applies to all beneficiaries, regardless of their relationship to the original owner. If the funds are not withdrawn within 10 years, the beneficiary will be subject to a 50% penalty on the amount that was not withdrawn.
The new changes to the 10-year rule allow beneficiaries to take distributions from their inherited IRA over a longer period of time. The new rules allow beneficiaries to spread out their withdrawals over the course of their life expectancy. This means that beneficiaries can take smaller withdrawals each year and avoid the 50% penalty.
The changes to the 10-year rule provide more flexibility for beneficiaries of inherited IRAs. It allows them to take smaller withdrawals each year and spread out the distributions over their lifetime. This can help beneficiaries manage their finances more effectively and avoid a large tax bill.
The changes to the 10-year rule are a welcome update for beneficiaries of inherited IRAs. It provides more options and flexibility for those who are inheriting an IRA and allows them to manage their finances more effectively.
Thank you, helped a bunch.
Chapters would have been great
Oh this makes me want to scream I have 2 I have to deal with from 2020 and I have no idea what to do with them.
I like the way
your mind works.
Thank you.
And do you have to take inherited Roth Rmds inherited after 2020?
You mentioned the minimum distribution is 3 or 4%, where is the determined please. Is there a table for something that determines that percentage? I really do not want to take anything this year from an inherited IRA since the market is way down. Any guidance is appreciated. Thank you.
You guys are the best. Thank you for this update. Great work.
It would be helpful if there was a flowchart. Just saying
After reading the IRS notice, it wasn't clear to me that owners of an inherited IRA could delay taking (without incurring a penalty) a 2022 RMD if a decedent had already started taking distributions before their death . Does the waiver only apply to situations where decedents had died prior to taking the RMDs?
Always appreciated!
Maybe I missed it. But does this 10 year rule effect existing inherented IRAs? My mother passed in 2009 and I’ve been taking an RMD since then. Do I now have 10 years to exhaust it. It’s substantial and large RMDs each year will boost my tax bracket. I made the mistake of taking a larger withdrawl than the minimum one year, and I’m still paying the price to the IRS and State tax board.
This is a very helpful video. Fidelity has not been helpful on this. I'm dealing with this issue from a 2020 death, and I elected in 2020 to use the equal distributions over 10 year method to empty the inherited IRA. (I assumed the IRS would not allow waiting until year 10, so I'm not surprised by the regulations.) I'm simply dividing the inherited IRA distributions equally over 10 years and reducing regular IRA distributions by that amount, and adjusting for any increase or decrease in value. The distribution amounts are well in excess of the RMD amounts from the inherited IRA. That way the tax effect of the distributions from the IRAs are identical, and for my situation this works fine. But everyone has a different situation.