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Do I Need to Take an RMD on my Inherited IRA?

Do I Need to Take an RMD on my Inherited IRA?

May 21, 2024

If you inherited an IRA after 2019, you might know that you are required to empty that IRA and pay taxes on the money within 10 years of the date of death. However, many people are unclear about Required Minimum IRA Distributions that might be expected for inherited IRAs.

One reason for the confusion is that the IRS has made more than one ruling on this process. Here is the latest news:

  • If you are a spouse or a child of the original owner, you DO NOT need to empty the IRA within 10 years of the original owner’s death. You are expected to take distributions based on your life expectancy.
    • If the original owner had started RMDs, you must continue them based on your life expectancy.
    • If the original owner had NOT started RMDs, you must begin distributions in the year the deceased owner would have reached age 73, based on your life expectancy.
  • If you are NOT a spouse or child of the original IRA owner, you generally need to empty the IRA within 10 years.
    • If the original owner had NOT yet started RMDs before their death, you have the full 10 years from the date of death to make distributions.
    • If the original owner had started RMDs before their death, you should make distributions each year. If you failed to do so in 2020-2024, you can rectify this without an EXCISE penalty. Consult your tax advisor, but if you make catch-up distributions, you can bring yourself into compliance without the 50% excise tax.
  • Some beneficiaries who are not spouses or children are eligible to distribute the inherited IRA over their life expectancy. These special beneficiaries, called eligible designated beneficiaries, are either:
    • Disabled at the time of the original owner's death.
    • Chronically ill at the time of the original owner's death.
    • Not more than 10 years younger than the original owner. You can be older.

Yes, this is a bit confusing, and it could make a meaningful difference to your tax situation and financial planning strategies. It makes sense to consult with your tax advisor and probably with an experienced, highly trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor in West Saint Paul, Minnesota, to help better understand how the inherited IRA fits into your overall financial plan. I love to meet new people, so follow this LINK to find a time for us to have a get-acquainted visit.

Yes, this is a bit confusing. And yes, it could make a meaningful difference to your tax situation and maybe to some of your financial planning strategies. Yes, it does make sense to consult with your tax advisor, and probably with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor in West Saint Paul, Minnesota to help better understand how the inherited IRA fits in your overall financial plan. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.

I am a financial planner who is an advocate for my clients ALL THE TIME – a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.

And yes, I’m still taking on a few great families to be part of my financial planning practice in West Saint Paul, Minnesota and, thanks to Zoom, across the country.

Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.