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Inherited IRA Update

As many of you know, in 2019 Congress passed legislation called Setting Every Community Up for Retirement Enhancement (‘SECURE’) Act which changed the required minimum distribution requirements on non-spousal inherited IRAs. This law did away with the so-called “stretch IRA”, establishing a mandatory 10-year window for the distribution of inherited IRA funds applying to most beneficiaries other than spouses. Under the new rules, beneficiaries were required to fully distribute the account within 10 years. The original law did not stipulate if these inherited IRAs were subject to annual required minimum distributions (RMD) in the years leading up to the 10th.

Fast forward to early 2022, the IRS publicly stated they were going to revisit how this law was written and being interpreted by wealth professionals and accountants alike. Last Friday, the IRS put out a notice saying the 50% penalty for failure to take annual distributions would be waived for 2021 and 2022 RMDs but RMDs would be required on non-spousal inherited IRAs beginning in 2023.

If you inherited an IRA in 2020, 2021 or 2022 you will need to start taking an RMD in 2023. To get this figure you should consult with your CPA or you may click here for a link to Charles Schwab’s RMD calculator. Our great Client Service Team here at Chesley, Taft continuously monitors our client’s RMDs and is happy to assist you in scheduling your distributions.

We can’t be certain this is the last ‘update’ we will receive on this topic but we will post any further IRS guidance.

Feel free to contact us with any questions.


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