IRS 10-Year Rule for Inherited IRAs: Kiplinger Tax Letter

Before the December 2019 SECURE Act, IRA owners who died could leave their accounts to children, grandchildren, or non-spouse individual beneficiaries, which allowed a stretch of required minimum distributions (RMD) over a more extended period tax-free. Congress ultimately saw this as a loophole and enacted the 10-year clean-out rule.

The 10-year Clean-Out Rule dictates that IRA funds must be distributed within ten years of the owner’s death. In March 2022, the IRS issued proposed regulations that apply the Rule differently based on whether the original IRA owner died before or after their first beginning date for taking RMDs. 

If the owner died before taking RMDs, the beneficiaries did not need to take distributions from the IRA each year and could wait until year 10 to take out all of the money or even skip years, so long as the IRA is depleted within ten years. If the deceased IRA owner died after the start date, then annual RMDs must be paid to the beneficiary in years one through nine.

For more information see Joy Taylor “IRS 10-Year Rule for Inherited IRAs: Kiplinger Tax Letter” Kiplinger, July 29, 2023.

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2023/08/irs-10-year-rule-for-inherited-iras-kiplinger-tax-letter.html