Secure Act, Inherited (non-spousal) IRA RMD rule change, IRS pending

catch22

The 10 year RMD rule for non-spousal inherited IRA's was part of the legislation in the Secure Act of early 2020. This rule is now subject to a language interpretation and also will have a new public comment period to formalize "the rule".
The below article provides some information; as well as a link to the current IRS Pub. 590-B.
I will attempt to keep track of this rule change going forward, but solicit others here to provide information as discovered.

Note example: For our house, part of a written plan instruction was that: One has 10 years to "take" all of the monies from a non-spousal inherited IRA; meaning that all of the money could taken in year 10, if desired. The "new" rule meaning would require RMD's for years 1-9, with the balance taken in year 10.


Secure Act, Ed Slott article

Regards,
Catch

bee

@catch22,

Their IRA discussion board is very helpful to pose a scenario/question that you would like answered

https://irahelp.com/forums/ira-discussion-forum

Derf

@catch22 : Thanks for the "good" news.
From the link : One interesting quirk of this change is that it is impossible for anyone to have an RBD in 2021.
Hells Bells I already took mine !!
Took one early last year & it cost me about one grand ! Now I wish I had undone at least half of the RMD as I then would have avoided the doughnut hole . $75000- $80000 income & then stimulus check is prorated.
Let us hope all this (!X#&*0 gets sorted out !

Enjoy your weekend, Derf

msf

Bottom line: I [Ed Slott] believe this will be corrected by IRS to show that the 10-year rule means no required distributions until the end of the 10-year post-death period, and no RMDs will be required for years one through nine. However, RMDs can be taken voluntarily by beneficiaries at any time within the 10 years based on their own tax situations.

I keep looking through the Pub to find a statement that one must take RMDs.

p. 12 says that "if the deceased beneficiary was an eligible beneficiary, any remaining balance in the account must be distributed within 10 years of the beneficiary's date." The Pub then gives an example of how you might use standard RMD calculations for the first nine years without ever saying that you must draw money out this way. This is the example that Ed Slott refers to.

Other Pub writing says more even clearly that you must either start taking RMDs or take full distributions under the 10 year rule:

p. 10: "[Death in 2020] Any ... individual beneficiary of an owner who dies before the required beginning date ... must start taking distributions in 2021 based on his or her life expectancy (or elect to fully distribute the account under the 10 year rule by the end of 2030).

p. 11: "The terms of most IRA plans require individual designated beneficiaries, who are eligible designated beneficiaries, to take required minimum distributions using the life expectancy rules (explained later) unless such beneficiaries elect to take distributions using the ... 10-year rule.

Finally, worth noting is that IRS Pubs are just writing for the masses. They are not regs or legal interpretations of regs. (Though often, the IRS just carbon copies the regs into the Pubs, which defeats the purpose of making the regs clear to the general public.) As Slott notes, "IRS has not yet released official regulations." So it's absurd to think that this Pub could be presenting the IRS interpretation of regs that don't yet exist.

In the immortal words of Douglas Adams:

Old_Joe

... and thanks for the fish!

msf