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The SECURE Act was a sweeping estate planning law that fundamentally changed the way you need to take RMDs from inherited IRAs.
Before, you could stretch RMDs across your life thus spreading the tax liability throughout your life.
Now, the stretch rules have been replaced by the 10-year distribution rule. This states that you need to withdraw the full inherited IRA balance within 10 years.
But this often-quoted 10-year distribution rule actually leaves more than 10 years to fully exhaust that IRA.
In fact, a confusing detail actually leads to the 10-year rule turning into an 11-year rule.
This video explains exactly why…
#SECUREACT #Estateplanning #InheritedIRAs
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Thanks for the great video, but wish I had seen it last year. I am in this exact situation having inherited an IRA in June of last year with the understanding I could take up to 10 years to withdrawal 100% of the assets. However, now my understanding is the IRS has clarified its regulation and that we now must take RMDs over the 10 year period and ensure the assets are fully withdrawn by year 10. Further, it is important to verify that the full RMD was taken in the year of death because the beneficiary is now responsible for taking the RMD on behalf of the original account owner (if it wasn’t already taken) based on the RMD of the original account owner. If you fail to take this (as we did) you could be subject to the 50% penalty. A painful lesson I learned relying on my tax and financial advisors to advise my of this important tax requirement.
I was informed a few days ago that now the IRS is saying yes there is a required minimum distribution for the first 9 years. They have created a big mess. No one seems to know what's going on.
One strategy not mentioned if you will turn 70 1/2 within the 10 year period, are charitably inclined, and need to avoid a bump to your MAGI is to donate the money directly to charity from the IRA with a QCD. I read that the limit is $100k per year.
To be clear, this only applies to new IRA inheritance after Jan 2020 correct? if you inherited an IRA in say 2017, You don't have to take all distributions within 10 years but could stretch this out over 20-30 years depending on your age. I just discovered your you tube station. Love it.
New subscriber bingeing on your channel! Appreciate the great content!! My father passed 12/26/21. His “estate” essentially took distributions for that year. Am I correct to assume that for me, the 10 year rule begins 2022 negating the “11 year rule stretch?
The IRS states that the 10-year rule requires the IRA beneficiary to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner's death. That means it is a 10-year rule if the owner dies on December 31st and an 11-year rule if the owner dies on January 1st. My inherited IRA has about a 10.5 year rule.
Do distributions have to be in the tax year or before that tax years filing date?