IRS Clarifies RMD Rules for Inherited IRAs: What Beneficiaries Need to Know

At our firm, we believe that clarity and thoughtful planning are essential when navigating complex financial rules—especially when it comes to Required Minimum Distributions (RMDs) from inherited retirement accounts. Recent guidance from the IRS helps resolve longstanding confusion around these rules, providing important direction for beneficiaries and their advisors.

Understanding the 10-Year Rule

The SECURE Act of 2019 introduced a significant change for most non-spouse beneficiaries of inherited IRAs, requiring that these accounts be fully distributed within 10 years of the original owner's death. However, the law left a key question unanswered: Are beneficiaries required to take RMDs each year within that 10-year period, or can they wait until the end?

The IRS has now provided clarity:

• If the original account owner had already started taking RMDs prior to their death, beneficiaries are required to take annual RMDs during the 10-year period.

• If the original owner had not yet begun RMDs, beneficiaries are not required to take annual withdrawals, but the entire account must still be distributed by the end of year 10.

Extended Penalty Relief

Recognizing the confusion this issue created, the IRS has also extended penalty relief for missed RMDs through 2024. Beneficiaries who did not take required distributions in 2021, 2022, 2023, or 2024 will not be penalized. This offers some welcome breathing room, but the expectation going forward is clear: the annual RMD requirement will be enforced where applicable.

Why This Matters for Families We Serve

Inherited IRAs can be powerful tools for preserving and transferring wealth—but only if managed thoughtfully and in line with IRS rules. Failure to comply with RMD requirements may trigger penalties of up to 25% of the missed distribution amount, making proactive planning essential.

This recent IRS guidance allows us to better support families as they navigate these complexities. Whether structuring annual distributions to align with your cash flow needs or managing tax implications, we are committed to helping you make informed decisions with confidence.

What You Should Do Next

If you or your loved ones have inherited an IRA, we recommend reviewing your distribution plan now in light of this IRS clarification. Our team is here to ensure that your strategy complies with the latest rules—and that it supports your broader financial goals.

Please reach out to discuss how these updates may impact your situation.