Recent IRS regulations direct that if you inherited an IRA or 401(k) from someone who died in 2020 or after, and the decedent died after age 72, you (the beneficiary) must start taking Required Minimum Distributions (“RMDs”) right away!
When the inherited IRA rules changed in 2020 to require a 10-year distribution period for the beneficiary (rather than a lifetime stretch over the beneficiary’s life expectancy as before), everyone assumed there would be no RMD for years 1-9 so long as the entire IRA was distributed by the end of year 10.
Now we know this is NOT the case. There are RMDs for beneficiaries of inherited IRAs in years 1-9. For the first 9 years after a decedent’s death, the beneficiary must withdraw at least the RMD as calculated using IRS tables based on the beneficiary’s current age. In year 10, the entire balance of the IRA must still be withdrawn by the beneficiary.
Thankfully, if you inherited an IRA after 2020 and did not take RMDs for 2020 and 2021, the IRS recently indicated (in Notice 2022-53: N-2022-53 (irs.gov)) that it would not enforce the 50% missed-RMD excise tax for failure to take RMDs from inherited IRAs subject to the 10-year rule.
Whew! That’s good news, but make sure to contact your plan administrator to calculate and take your RMD for this year by December 31, 2022 to avoid a 50% penalty this year!
Rice & Quattrone, PC can help if you have questions or concerns about the IRA distribution rules. Call us at 856-673-0048.