By Ian Berger, JD
IRA Analyst
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It’s been over four years since the SECURE Act upended the rules for beneficiary IRA required minimum distributions (RMDs), and there’s still plenty of confusion about the new rules. The IRS did give us proposed SECURE Act regulations in February 2022, but those rules still haven’t been finalized. They have also raised a lot of new questions.
Here’s a cheat sheet on how the rules currently stand for IRAs inherited after 2019. (Pre-SECURE Act rules apply for IRAs inherited before 2020.)
Two Important Questions
First, we always need to answer two important questions:
- Did the IRA owner die before or after his required beginning date (RBD) for RMDs? The RBD is April 1 of the year following the year IRA owner reaches his first RMD year. (The first RMD year is age 73 under SECURE 2.0.) A Roth IRA owner is always considered to have died before her RBD.
- Is the IRA beneficiary an eligible designated beneficiary (EDB), a non-eligible designated beneficiary (NEDB) or a non-designated beneficiary (NDB). An EDB is a surviving spouse of the IRA owner; a minor child (under 21) of the IRA owner; a chronically-ill or disabled person; or someone not more than 10 years younger than the IRA owner. An NEDB is an individual beneficiary who isn’t an EDB. An NDB is a beneficiary who isn’t a person (e.g., an estate, a charity or certain trusts).
Traditional IRA Owner Died Before Required Beginning Date OR
Roth IRA Owner Died At Any Time
EDB: A non-surviving spouse EDB can elect to stretch RMDs over her life expectancy or have the 10-year payment rule apply. If the 10-year rule is elected, the entire account must be emptied by 12/31 of the 10th year following the year of death. However, no annual RMDs are required during the 10-year period. Note: There are different rules for surviving spouse EDBs who inherit after 2023.
NEDB: The 10-year rule applies, but no annual RMDs are required.
NDB: The 5-year rule applies. So, the entire account must be emptied by 12/31 of the 5th year following the year of death, but no annual RMDs are required during the 5-year period.
Traditional IRA Owner Died On or After Required Beginning Date
EDB: Stretch RMDs apply. But if the EDB is older than the deceased IRA owner, the EDB can use the deceased person’s older life expectancy in calculating RMDs. (However, the inherited IRA must be emptied when the EDB’s life expectancy runs out.)
NEDB: The IRS proposed regs say that both the 10-year rule applies and annual RMDs during the 10-year period are required. However, because of widespread confusion, the IRS has waived the annual RMD requirement for 2021, 2022, 2023 and 2024 in this situation.
NDB: AnnualRMDs must continue over the deceased IRA owner’s remaining single life expectancy had he lived (the “ghost rule”).