The Listen to Lawrence Letter – IRS changes rules on Inherited IRAs and RMDs

April 26, 2021
Inherited IRAs and RMDs — IRS SAYS OOPS!
I have talked to you many times in the past about the SECURE ACT, you know, the one where, with limited exceptions, when you inherit an IRA on or after January 1, 2020, you must take out all the money from the IRA (or another retirement plan) over a 10 year period rather than over your life expectancy.   You remember this, right? Of course you do! I originally told you that you didn’t have to worry about required minimum distributions (RMDs) but instead could figure out what was best for you at any point until 12/31 of the tenth year after the decedent’s death.
Then last week I told you about a new IRS publication (PUBLICATION 590-B) which provided an example of how the SECURE ACT is supposed to work, relating how during years 1-9 RMDs must still be withdrawn based upon your life expectancy, with the balance out by the end of the 10th year (notwithstanding that all RMDs were suspended in 2020 because of Covid). UGH! We had something simple and then they brought complexity back.
Or so it seemed.
Well, last week was a long time ago.  This week we have heard from an IRS official that the whole thing was a mistake. “OOPS!” An official correction will be coming soon.
I had told you last week to hold off taking these RMDs this year because the whole thing did not make sense……and for once I was right.😊 Predicting what the IRS may do is a fool’s game. However, we are back to doing whatever you want until the last day of the tenth year. Talk to your financial advisors, accountants and/or us, to figure out what is best in your unique circumstances.
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