IRS RMD Changes To The 10 Year Rule

Key Takeaways

• Non-spouse beneficiaries inheriting from someone who died after their required beginning date (April 1st of the year after turning 72) must now take Required Minimum Distributions (RMDs) in years 1-9 of the 10-year window, not just empty the account by year 10
• Surviving spouses have favorable treatment: if the deceased spouse was born on or after July 1, 1949, the surviving spouse can delay taking RMDs until the year the deceased would have turned 72, rather than the year after death
• These are proposed regulations in a comment period through mid-May; the IRS is expected to finalize them before the end of 2022, so current rules may change—don't make permanent decisions based on proposed regulations alone
• The new rules create complexity based on the deceased's birth date and required beginning date; beneficiaries who inherited in 2020 from someone past their RBD should review whether they owe back RMDs starting in 2022
• Trusts and entities used as IRA and 401(k) beneficiaries receive mostly favorable treatment under the new proposed regulations, making them valuable planning vehicles for asset protection