The Listen to Lawrence Letter: IRA information from a client

January 19, 2024
January 9, 2024 • Volume 5 Issue 206
IRA information I received from a client….read on:

In my December 19, 2023, LISTEN TO LAWRENCE LETTER (Volume 4, Issue 200), I discussed Required Minimum Distributions (RMDs) from inherited IRAs. I explained that if you (a non-disabled adult child) inherited an IRA (or other retirement plan) from your parent who died on or after 1/1/20, you must take all of the money out of the IRA by the end of the 10th year. This is the newish 10-year rule that came into being with the SECURE ACT on 1/1/20.  I also stated that each year during the 10-year period, the son must take out RMDs (if the father died after he was required to take out minimum distributions) based upon the son’s life expectancy.

There was great confusion out there in the tax community regarding whether or not the son would have to take out Required Minimum Distributions each year or at any time as long as it was all distributed by the end of the 10th year. Because of this confusion, the IRS let us know that they were not going to worry about RMDs in 2021 and 2022, but indeed RMDs were otherwise required each year. That is where I thought all this ended.

A client of mine called me and said….”Hold the presses! The IRS recently said that we do not have to take out anything for 2023 either.”

My client is correct! The bottom line is:

1.           If you inherited an IRA (or other retirement plan),

2.           from any person who is more than 10 years older than you,

3.           and not your spouse,

4.           and you are not disabled or chronically ill,

5.           and you are not a child under 21,

6.           and such person died on or after 1/1/20 but after they were required to take out RMDs themselves,

7.           then you must take out RMDs based on your life expectancy over the 10-year period after their death, but not in 2021, 2022, AND 2023.

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