The Internal Revenue Service and the Treasury Department have released final regulations updating the required minimum distribution (RMD) rules for beneficiaries under the 10-year rule.
These regulations, which stem from the SECURE Act and SECURE 2.0 Act, confirm that most IRA beneficiaries will be required to take annual distributions for 10 years following the account holder’s death. Think Advisor.
Key points of the final rule include:
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Non-qualified designated beneficiaries subject to the 10-year rule must take RMDs annually.
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Individual beneficiaries who have begun required annual distributions will be required to continue making those distributions even if the account balance is distributed in full within 10 years.
Ben Henry Morelandsenior financial planning geek at Kitces.com, points out that while these rules don’t bring any dramatic changes to planning, they do make retirement accounts “much more complicated. For example, spousal beneficiaries have three different options for what to do with a deceased spouse’s retirement accounts, each with their own RMD calculations.
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Jeff Levinchief financial planning nerd at Kitces.com, highlights that annual distributions are required during the 10-year rule period if the death occurs after the required starting date (RBD), although this rule doesn’t take effect until 2025 due to a previous IRS notice.
The IRS and Treasury Department have also issued proposed regulations addressing additional RMD issues under the SECURE 2.0 Act. We are inviting public comment on these proposed regulations, which cover other changes related to RMDs.
Experts say that while these regulations bring clarity to many issues, they also add complexity to managing retirement accounts. Advisors need to stay informed about these complex rules to provide useful advice to clients managing retirement plans and inheritance accounts.
The financial planning community is now anticipating further guidance on other SECURE 2.0 provisions, such as the rollover of unused 529 plan funds to Roth IRAs.
These new regulations underscore the changing landscape of retirement planning and the increasing importance of expertise in understanding the complex tax rules surrounding retirement accounts.
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This article IRS finalizes 10-year rule on retirement withdrawals, making things “much more complicated” Originally Benzinga
