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Non-Spouse Inherited IRA Rules: Understanding 2024 RMD Requirements

March 19th, 2024 | BY Steven Guipe | Financial & Retirement Planning | Wealth Management
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By: Steven Guipe, CFP®, Wealth Advisor In the realm of retirement planning and taxation, it’s important for individuals to keep pace with changes that could influence their financial strategies. A key area of focus is the required minimum distributions (RMDs) from inherited Individual Retirement Accounts (IRAs), especially for non-spousal beneficiaries. The SECURE Act, a significant legislative development, and subsequent temporary relief measures have significantly altered the landscape of inherited IRAs, making it more intricate to navigate. Understanding the implications of these regulations is crucial for ensuring compliance and informed decision-making. Let’s explore a question we’ve fielded lately: whether non-spousal beneficiaries need to take RMDs from inherited IRAs in the current year and what considerations they should consider moving forward. Non-spousal beneficiaries who inherited an IRA from someone who died after 2019 generally need to take the required minimum distributions (RMDs) in 2024. This is due to changes implemented by the SECURE Act, which modified the rules for inherited IRAs. Here’s a breakdown of the situation:
  • Spouses vs. Non-Spouses: Spouses who inherit an IRA have more flexibility and can treat the inherited account like their own, meaning they can delay RMDs until they reach their own required beginning date (RBD), which is typically age 73. However, non-spousal beneficiaries face stricter rules.
  • The 10-Year Rule: Under the SECURE Act, most non-spousal beneficiaries must generally distribute the entire inherited IRA balance within 10 years of the original owner’s death. This is known as the “10-year rule.”
  • RMDs and the 10-Year Rule: While the 10-year rule mandates full distribution within ten years, it doesn’t eliminate RMDs. Instead, non-spousal beneficiaries must take RMDs each year based on their own life expectancy until the entire balance is distributed.
However, there’s a crucial point to consider for 2024:
  • RMD Relief in 2021-2023: The IRS provided temporary relief for RMDs from inherited IRAs for the years 2021, 2022, and 2023. This meant non-spousal beneficiaries didn’t have to take RMDs during those years.
  • RMDs Resume in 2024: With the 2023 tax year closed, the RMD requirement for inherited IRAs resumes in 2024. This means non-spousal beneficiaries who inherited an IRA from someone who died after 2019 and haven’t yet depleted the account need to calculate and withdraw their RMD for 2024 by December 31.
It’s important to note:
  • This information is for general knowledge only and shouldn’t be considered tax advice. Consulting with a qualified financial advisor or tax professional is crucial to understanding the specific rules and implications related to your inherited IRA.
  • Different RMD calculation methods and exceptions may apply depending on the circumstances, so seeking professional guidance is highly recommended.
By understanding the changes brought about by the SECURE Act and the temporary relief in recent years, non-spousal beneficiaries can ensure they comply with RMD requirements and avoid potential penalties in 2024 and beyond. Seek Professional Guidance While this guide provides a foundational understanding, personalized advice from a qualified financial advisor or tax professional is invaluable. Schedule a complimentary consultation with me, Steven Guipe, CFP®, or another member of the Maner Wealth team to discuss your specific situation and explore strategies tailored to your financial goals.   Investment advisory services offered through Maner Wealth, a State of Michigan Registered Investment Advisor. Subadvisory services offered through Advisory Alpha LLC, a SEC registered investment advisor.