Owners of inherited IRAs may be in for a jolt. In a surprise announcement, annual required minimum distributions (RMDs) will be required for those who recently inherited individual retirement accounts (IRAs).

In the SECURE Act, Congress eliminated the “Stretch IRA” for most inherited IRAs beginning in 2020 and put in place a “10-year rule.” It was expected that the IRA balance would be required to be withdrawn by the end of that 10-year period with no annual distribution requirements. In May 2021, the IRS confirmed that annual RMDs were not required. Now they flip-flopped!

Last month, the IRS released the long-awaited SECURE Act proposed regulations reinstating required minimum distributions (RMDs).

“The IRS is interpreting the SECURE Act 10-year rule differently than what everybody thought,” Ed Slott said. Ed is a nationally recognized IRA distribution expert and has been named “The Best Source for IRA Advice” by The Wall Street Journal.

Under these proposed new regulations, a traditional IRA inherited from a non-spouse must take annual distributions in years one through nine, and the balance in year 10. Some taxpayers could already be in trouble, and the penalty for missing an RMD is 50 percent!

Prior to the SECURE Act, a non-spouse beneficiary could inherit your IRA and keep the IRA over their lifetime, taking only minimum required payments every year. That was the “Stretch IRA” that Congress eliminated. Why was it eliminated? Congress decided to tax your deferred accounts sooner than later to pay for other items in its agenda.

As a member of Ed Slott’s Master Elite IRA Advisor Group, Mr. Rawl has direct access to Ed and his team of IRA experts. There are some conditions where the 10-year rule may not apply! Please download this PDF document for details and reach out to us if you have any questions or need assistance.