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Hello Megan,
Do you have an inherited IRA you received after January 2020?
The bottom line: If you inherited an IRA from a person who died after December 31, 2019, you will not have to take a distribution in 2023. However, you will have to empty the IRA account by the end of the tenth year after the original owner’s death.
The gory details: Due to the SECURE Act of 2019, most beneficiaries can no longer stretch inherited IRA distributions over their lifetimes. Instead, most non-spouse beneficiaries who inherited IRAs from a person who died after December 31, 2019, must empty the account by the end of the tenth year after the original account owner’s death.
The IRS interpreted the SECURE Act to require annual distributions from the inherited IRA in addition to requiring the accounts be emptied after ten years. In 2022, the IRS waived the penalty for not taking the annual required distribution for 2021 and 2022. On July 14, 2023, the IRS issued Notice 2023-54 (https://www.irs.gov/pub/irs-drop/n-23-54.pdf) extending the inherited IRA RMD penalty waiver for 2023.
Developing a tax-efficient strategy for taking money out of all of your IRAs, inherited or otherwise, is an important part of what we do. Please let us know if we can assist you or someone close to you with this planning.
Have a wonderful summer!
Sincerely,
Cass, Megan and Bleckley
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