Time: 2024-07-21
The Internal Revenue Service has announced that the 10 - year period for inherited retirement accounts will not be extended . This news brings clarity to retirement - account beneficiaries who were previously uncertain about when they needed to take money from their inherited accounts . The Secure Act of 2019 initially established the requirement that beneficiaries must withdraw money from inherited accounts within 10 years . However , the IRS has now provided clarification on the rules , specifically regarding the frequency of distributions and the individuals responsible for making these withdrawals . It is important to note that these rules do not apply to eligible designated beneficiaries , such as spouses , minor children , and disabled or chronically ill individuals.
One of the key factors determining whether beneficiaries must take annual payments from inherited accounts is the concept of required minimum distributions ( RMDs ) . Required minimum distributions are federally calculated minimum annual withdrawals that investors must take from most retirement accounts , excluding Roth accounts . According to the newly issued rules , individuals who inherit an account from an original owner who took RMDs must make annual withdrawals over a 10 - year period . On the other hand , beneficiaries who inherit accounts from individuals not yet required to take distributions have the flexibility to withdraw funds as they see fit within the 10 - year timeframe.
The final regulation regarding inherited retirement accounts will go into effect on Sept. 17 , 2024 , with the determination of RMDs starting on Jan. 1 , 2025 . It is crucial for beneficiaries to adhere to the 10 - year distribution window from the time of inheritance , without the possibility of an extension . While beneficiaries are not required to take RMDs retroactively , it is advisable to consult with financial professionals regarding the best course of action for managing inherited assets.
The rules surrounding inherited retirement accounts can be convoluted due to several factors . Changes in the age at which individuals must take required minimum distributions have occurred multiple times since the enactment of the Secure Act in 2019 . Additionally , the composition of the account in terms of Roth and traditional investments will impact how distributions are handled . Beneficiaries who have inherited IRAs have been granted the ability to delay RMDs without penalties in recent years , providing some flexibility in managing their inherited assets.
It is advisable for beneficiaries to consider the implications of delaying RMDs , as doing so may result in higher distributions and potentially increased tax liabilities in the future . Seeking guidance from qualified professionals at the financial institution overseeing the inherited assets can help beneficiaries navigate the complexities of managing inherited retirement accounts effectively.
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