The rules on inherited IRAs were most recently changed in the 2019 Secure Act, which introduced a new 10-year payout rule for inherited accounts. The previous rule said those who inherited an IRA, Roth IRA or 401(k) could spread out withdrawals over their lifetime.
Many tax professionals interpreted the new 10-year rule to mean that these heirs could wait until the 10th year before taking any payouts, and that is what the IRS said in a May 2021 revision to Publication 590-B, a 69-page guide to IRA distributions. But then, in February, the IRS issued new guidance that would require heirs to take annual withdrawals in cases where the original owner died on or after his required beginning date for taking distributions.
Briefly, The WSJ says these are the new rules:
Instead, the new IRS guidance would require heirs subject to the 10-year rule to take annual withdrawals from the accounts during that period if the original owner died on or after his or her “required beginning date” for payouts. Under current law, that’s April 1 after the year in which the IRA owner turns 72.
For example, say that a 50-year-old inherits a traditional IRA from her 77-year-old mother, who died early this year. According to the new rules, this heir must take annual IRA payouts based on her life expectancy as prescribed in IRS Pub. 590-B. Then she must withdraw the remainder when she’s 60. (She could, of course, take larger withdrawals earlier.)
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