[1]The IRS and Treasury Department issued final regulations [2] reflecting updates from the SECURE Act and SECURE 2.0 Act affecting retirement plans, IRAs, and beneficiaries, addressing additional issues related to Required Minimum Distributions (RMDs) of inherited retirement accounts. Specifically, the IRS confirmed that most non-spouse beneficiaries have just 10 years to deplete inherited retirement accounts and must take yearly RMDs, if the account was inherited since 2020 and if the original account owner had already started RMDs.
Beneficiaries should note, however, that the tax implications of those RMDs may lead some to consider withdrawing more from inherited accounts earlier in the 10-year window, while tax rates are lower. Dozens of individual tax provisions, including lower federal income tax brackets, are scheduled to sunset after 2025, potentially lowering the taxes owed on distributions taken in 2024 and 2025. Of course, Congress may extend or alter these tax rates, and individual tax planning and circumstances should also play into tax planning around inherited retirement account RMDs.
For specific advice on how to best handle RMDs from inherited retirement accounts, please contact a ShindelRock tax professional. [3]