A Cheat Sheet for IRA Beneficiary RMDs
Navigating the new IRA beneficiary Required Minimum Distribution (RMD) rules has become increasingly complex since the SECURE Act took effect. Whether you're inheriting an IRA or planning your estate, understanding these critical changes will help protect your retirement assets. Let's break down the current rules for inherited IRAs and what you need to know.
SECURE Act Updates for IRA Beneficiaries
The landscape of IRA inheritance rules changed dramatically in 2020 with the SECURE Act. While the IRS proposed new regulations in February 2022, many beneficiaries and advisors still face uncertainty as these rules await finalization. This guide applies to IRAs inherited after 2019 (different rules apply to IRAs inherited before 2020).
Critical Questions for IRA Inheritance Planning
1. Understanding the Required Beginning Date (RBD)
Your distribution requirements depend on when the IRA owner died relative to their RBD:
- The RBD occurs on April 1 following the year when the IRA owner reaches their first RMD year
- Under SECURE Act 2.0, the first RMD year begins at age 73
- Important: Roth IRA owners are always considered to have died before their RBD
2. Identifying Your Beneficiary Classification
Eligible Designated Beneficiary (EDB)
- Surviving spouses
- Minor children (under 21) of the IRA owner
- Disabled or chronically ill individuals
- Individuals not more than 10 years younger than the IRA owner
Non-Eligible Designated Beneficiary (NEDB)
Any individual who doesn't qualify as an EDB
Non-Designated Beneficiary (NDB)
Non-person entities including estates, charities, and certain trusts
IRA Distribution Rules by Beneficiary Type
Rules When IRA Owner Dies Before RBD (Including All Roth IRAs)
EDB Options:
- Choose between life expectancy distributions or 10-year rule
- Under 10-year rule: Empty account by December 31 of tenth year after death
- No annual RMDs required during 10-year period
- Special rules apply for surviving spouses inheriting after 2023
NEDB Requirements:
- Must follow 10-year rule
- No annual RMDs required
NDB Requirements:
- 5-year rule applies
- Account must be empty by December 31 of fifth year after death
- No annual RMDs required
Rules When Traditional IRA Owner Dies On or After RBD
EDB Rules:
- Life expectancy distributions required
- May use deceased owner's life expectancy if beneficiary is older
- Account must be emptied by end of beneficiary's life expectancy
NEDB Rules:
- 10-year rule applies
- Annual RMD requirement waived for 2021-2024
- Awaiting final IRS guidance
NDB Rules:
- Must continue RMDs using deceased owner's life expectancy ("ghost rule")
Get Professional IRA Distribution Planning
These complex RMD rules require careful navigation to avoid costly mistakes. Our team includes certified IRA specialists who can help optimize your inheritance strategy while ensuring compliance with the latest regulations.
Questions? Schedule Your Free Consultation with a Certified Financial Planner.Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.