We finally have long-awaited clarification on the requirement to withdraw minimum distributions from an inherited IRA as a follow-up to the Secure Act that went into effect on January 1, 2020.
Transitional rules in Notice 2024-35 provide final guidance that an excise tax will not be asserted to be due if you were required to take a minimum distribution based on the first point below but didn’t in 2020 through 2024. Effective January 1, 2025, RMDs must be taken in accordance with the rules below.
In Notice 2024-35, the IRS has issued final regulations clarifying the following RMDs for any non-eligible beneficiary of an inherited IRA:
RMDs After a Loved One’s Passing
If your loved one who passed away was already required to take minimum distributions, then you must take at least the RMD that your loved one would have been required to take in the first through ninth years after they pass away. Any remaining balance in the IRA must be withdrawn by the tenth year after passing.
Withdrawal Rules for Inherited IRAs Without RMDs
If your loved one was not required to take minimum distributions when they passed away, you must withdraw the entire balance from the IRA by the tenth year after passing.
Flexibility in Withdrawing Inherited IRA Funds
Under either of the above scenarios, you can choose to withdraw funds earlier, but it is not required.
Special RMD Rules for Eligible Beneficiaries
Eligible beneficiaries have different rules for required withdrawals from the inherited IRA. You are an eligible beneficiary if you are less than ten years younger than your loved one, a spouse, a minor child, a disabled or chronically ill person, or a trust. We encourage you to reach out to us to discuss your RMDs if one of these applies.
We encourage you to reach out to our office to discuss any applicable RMD for your inherited IRA if you have any uncertainty about what you should do for 2024.
