No Guidance on 10-Year RMD Stretch Despite Headlines

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In 2019, the SECURE Act changed how inherited required minimum distribution (RMD) rules work and added a new 10-Year Rule. Most professionals and even IRS publication authors thought they knew how the new 10-Year Rule worked, but the lawyers at the IRS had another idea.

If you want a full summary of the complexity, you can read our article, “The IRS Waives 2021 & 2022 Penalties Because Its Unclear How the New Inherited IRA 10-Year Rule Works” as below is just a summary. The summary is:

In a February 2022 notice, the IRS proposed the requirement of annual RMDs under the 10-Year Rule to reconcile a seemingly contradictory item in the U.S. Code created by the SECURE Act. As this was just proposed regulation and not yet final, they then later issued an October 2022 notice to say that they will waive penalties for failing to take a 2021 or 2022 inherited RMD for those who are caught in the limbo of this decision. They also noted in that October 2022 notice that whatever the new rules are won’t take affect until 2023 at the earliest.

While the decision not to penalize those who failed to take distributions in 2021 and 2022 was well received, the rest of the notice lacked clarity. We still are left wondering what will be decided, when it will be decided, and what we should do for 2023 onward.

Recent news headlines on this topic have been promising with titles such as:

However, despite the confidence of these headlines, as I write this the IRS has not yet released the final regulations. We are still waiting to find out if and how annual inherited RMDs will be required under the 10-Year Rule of the SECURE Act.

While we won’t know with any certainty until the IRS publishes their final guidance, it is likely that Inherited IRA owners will be required to take distributions if they inherited their accounts from an original owner who had already started RMDs and died in or after the year 2020.

We recommend waiting for the final guidance but being prepared for some sort of required distribution this year.

We will continue to monitor the IRS guidance on this matter. If you’d like to stay updated on our latest understanding of this issue, you may enjoy subscribing to our newsletter.

It is important to note that we are not tax professionals. As always, if you have any tax questions, the best advice is to consult with your tax professional.

Photo by Circe Denyer on Unsplash. Image has been cropped.

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Chief Operating Officer, CFP®, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 800 financial articles and is known for her expertise on tax planning.