FEDLIFE Podcast (Ep. 100): Understanding the New RMD Rules for Inherited IRAs: Your Essential Guide — Part II

Summary: In the first part of this two-parter miniseries, Ed Zurndorfer and Dan Sipe covered the intricacies and rules of non-spousal IRA inheritors while exploring all things IRA inheritance, its tax implications, and crucial considerations for beneficiaries.
This week, Ed and Dan explore the annual RMD requirements for inherited Roth IRAs. They unravel the complexities of the new RMD rules and detail how these changes impact non-spousal beneficiaries of inherited IRAs.

Ed and Dan discuss:
• The key differences between RMDs for non-Eligible Designated Beneficiaries (NEDBs) of traditional and Roth IRAs
• How Eligible Designated Beneficiaries (EDBs) can leverage the lifetime “stretch” option for inherited Roth IRAs
• Consequences of a beneficiary’s failure to take an annual RMD applicable to some beneficiaries subject to the 10-year rule
• And more!

Resources:
Understanding the New RMD Rules for Inherited IRAs: Your Essential Guide — Part I (Ep. 100) –

“New RMD Rules for Non-Spousal Beneficiaries of Inherited IRAs (Part I)” by Ed Zurndorfer –

Connect with Dan Sipe:
• Dan.sipe@stwserve.com
• LinkedIn: Serving Those Who Serve
•
• Twitter: Serving Those Who Serve
•
• Facebook: Serving Those Who Serve
•
Youtube: Serving Those Who Serve – youtube.com/fedlife…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

Understanding the New RMD Rules for Inherited IRAs: Your Essential Guide — Part II

In our previous article, we discussed the basics of inherited IRAs and the changes that were made to the required minimum distribution (RMD) rules by the Setting Every Community Up for Retirement Enhancement (SECURE) Act. In this article, we will dive deeper into these new rules to help you better understand how they may impact your inherited IRA.

Under the old rules, beneficiaries of inherited IRAs had the option to stretch out the distributions over their life expectancy, allowing them to minimize the tax impact and take advantage of the potential growth of the assets within the account. However, the SECURE Act introduced significant changes to the RMD rules for inherited IRAs, tightening the timeline in which beneficiaries must withdraw the funds.

One of the most important changes under the SECURE Act is that most beneficiaries are now required to completely empty the inherited IRA within 10 years of the original account owner’s death. This applies to beneficiaries who are not considered eligible designated beneficiaries, such as spouses, disabled individuals, and beneficiaries within 10 years of age of the deceased account owner.

For those who fall under the new 10-year rule, there are no annual RMDs required, but the entire account balance must be distributed by the end of the 10-year period. This may have significant tax implications, as the funds withdrawn will be subject to ordinary income tax rates, potentially increasing overall tax liability.

There are a few exceptions to the 10-year rule. Minor children of the deceased account owner, disabled individuals, and individuals who are chronically ill may qualify as eligible designated beneficiaries. These individuals are still able to stretch out the distributions over their life expectancy, just as before the SECURE Act. Once they reach the age of majority, however, they will be subject to the 10-year rule.

Spouses who inherit an IRA still have the option to treat the account as their own, meaning they can roll it over into their own IRA and delay RMDs until they reach age 72. This allows spouses to continue benefiting from the tax advantages of the inherited IRA and potentially postpone taxes on the funds until a later date.

It’s important for beneficiaries of inherited IRAs to carefully consider their options and consult with a financial advisor or tax professional to determine the best course of action. Each individual’s financial situation and goals will vary, and understanding the implications of the new RMD rules is crucial in making informed decisions.

Additionally, it’s worth noting that the new RMD rules only apply to inherited IRAs for account owners who passed away after December 31, 2019. If the death occurred prior to this date, the previous rules will still apply.

In conclusion, understanding the new RMD rules for inherited IRAs is essential for beneficiaries in order to navigate the tax implications and make informed decisions about managing their inherited assets. The changes introduced by the SECURE Act have significantly impacted the distribution timeline for most beneficiaries, emphasizing the need for careful planning and professional guidance to minimize tax liabilities and maximize the potential benefits of the inherited IRA.