Do you have an Inherited IRA? New rules could be coming your way.

David Mulhearn CFP® |

The Internal Revenue Service recently released Notice 2022-53 that provides guidance on required distributions for IRAs and defined contribution retirement plans inherited after December 31, 2019.

 

As it stood, the SECURE Act required IRAs and defined contribution requirement plans inherited after December 31,2019 to be fully distributed within 10 years unless the account owner is an Eligible Designated Beneficiary.

 

In general, here are the 5 categories of people who are considered an Eligible Designated Beneficiary:

  1. The owner's surviving spouse

  2. The owner's child who is less than 18 years of age

  3. A disabled individual

  4. A chronically ill individual 

  5. Any other individual who is less than 10 years younger than the deceased IRA owner  

 

For inherited IRA owners who are not considered an Eligible Designated Beneficiary, there has been confusion as to whether yearly distributions were required during the 10 year period or not. Many interpreted that there was no such requirement. Notice 2022-53 proposes a requirement for a minimum annual distribution determined by the Single Life Expectancy table along with the requirement to empty the account within 10 years. The proposed rules will not penalize those who did not take required distributions from inherited IRAs in 2021 and 2022.

 

These rules are not yet finalized by the IRS and Department of the Treasury, but we expect they will go into effect next year. Going forward, we will be working with our clients to plan for required distributions from these accounts in 2023 and beyond.

 

If you have any questions, we encourage you to reach out to your advisor.

 

For more information please visit IRS.gov.

 

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