Q: My mother died in 2022 and named me as beneficiary of her IRA. I was told that I was required to take distributions for 2023 and 2024 and that I may owe penalties and interest for failing to take RMD’s (required minimum distributions). Is that true?
A: Since your mother died after December 31, 2019, your distribution rules are governed by the SECURE ACT. You are considered a designated beneficiary of an inherited IRA and the 10-year rule applies.
Under the 10-year rule, you must withdraw all funds from the IRA by the 10th year following your mother’s death, which would be December 31, 2032. This means you no longer have the option to stretch the distributions out over your lifetime. Also, under the initial SECURE ACT provisions you are required to take your RMD each year of the 10-year period and failure to take RMD’s would result in penalties and interest to you.
However, the IRS has provided relief for years 2020 through 2025. For these years, beneficiaries of inherited IRA’s are no longer required to take annual distributions and there are no penalties for failing to do so. This temporary waiver applies to IRA’s, SEP IRA’s, Simple IRA’s, 401K plans, 403(b) plans and certain defined contribution plans. Final regulations are expected to provide guidance for RMDs for tax years beginning on January 1, 2025 and beyond.
Nancy Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Trusts and Estates. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.
PHONE: (631) 941-3434
EMAIL: INFO@BURNERL AW.COM