History
As far as your own IRA, in 2019 and before, owners were required to start taking Required Minimum Distributions (RMDs) at age 70 ½. In 2020 it became 72 and as of 2023 you must start taking the RMDs at age 73.
In 2019 and before, those who inherited an IRA generally were required to take a minimum distribution over their lifetime. With the commencement of the Secure Act in 2020 that changed and most beneficiaries must take out all of the money within 10 years after death.
YOUR OWN IRA distributions now
If you turned 72 in 2023, then you didn’t have to start taking RMDs. If you turn 73 in 2024, you will be required to take an RMD but can delay it until April 1 2025 however, if you do this, you will need to take 2 distributions in 2025. The IRS sets forth a lifetime tax table for you to follow with the amount of the distribution required.
How do INHERITED IRA distributions work now
If an IRA owner dies in 2024, you have to ask WHEN did the IRA owner die, before their Required Beginning Date (RBD) or after and then you have to ask WHO is the beneficiary.
If the IRA owner died before they were required to start taking distributions, (so before 73) and they left the IRA to one of their adult children. Then the adult child must take out all of the money within 10 years following the year of death. But because the owner wasn’t required to start taking distributions (the faucet wasn’t yet turned on), then the adult child isn’t required to take minimum distributions. We call the adult child a “Non-Eligible Designated Beneficiary”. Meaning, they were named/designated as a beneficiary on the IRA account but they don’t fit into one of the 5 special categories of “Eligible Designated Beneficiaries” (those five ; ie: the spouse; minor child but only up to 21; disabled and chronically ill individuals; and those not more than 10 years younger than the decedent) who will get to stretch the distributions over their remaining lives, for the most part).
If the IRA owner died after they were required to start taking distributions, and they left it to one of their adult children, then the adult child must again take out all of the money within 10 years following the year of death AND they must take RMDs for years 1-9 according to their lifetime schedule (so the faucet was turned on, and once turned on, cannot be turned off). BUT it seems like the IRS may not be enforcing this position as of May 2024, talk to your personal financial advisor.
What if I inherit a Roth IRA
The above rules apply to a Traditional IRA. Roth IRAs have been determined to not have a Required Beginning Date. So the owner of a Roth IRA does not have required minimum distributions and those inherit will also not have them. The beneficiary will still need to empty the account within 10 years of the date of death.
All of the above information is deemed reliable but should not be relied upon by any reader and the reader should contact their own tax professional to confirm their personal tax obligations according to their particular situation.
