Inherited IRAs: Reminder about Required Minimum Distributions

Under the SECURE Act, the way Inherited IRAs and Roth IRAs’ Required Minimum Distributions (RMDs) were handled was altered. And while the CARES Act temporarily removed the RMD in 2020, distributions are again required.

The SECURE Act went into effect on January 1, 2020 and, therefore, retirement accounts with inheritance occurring before December 31, 2019 will not follow the new process. For individuals that inherited a retirement account after the January date, the new rules apply.

However, in early 2022, the IRS proposed guidance pertaining to RMDs for inherited IRAs subject to the SECURE Act, including: original account owner passed after December 31, 2019 and the new 10-year ruling. The guidance hinted that the initial interpretation of the 10-year rule (eliminating the need for an annual required distribution) was in error. This proposed guidance would suggest that annual RMDs would be required in years 1-9, and the balance is brought to $0 by the end of year 10. This has caused confusion about whether RMDs were required for 2022, and the possibility that 2021 was missed. No new information was released about the proposal until Friday, October 7, via IRS Notice 2022-53.

The Notice provides clarity on a couple of items in question. First, for any inherited IRA subject to the SECURE Act, there will be no 50% penalty assessed for not taking a RMD distribution in 2021 or 2022. If a person did pay a 50% penalty, a refund from the IRS can be requested. Secondly, the penalty for missing RMD within the 10-year window would not be imposed until 2023 at the earliest.

What happens going forward?

We will find out more from the IRS in 2023. In 2022, a lingering question was ‘do I need to take an RMD for inherited IRA in 2022?’ and that answer is no based on this release. The Notice isn’t entirely clear, but it seems as though, with the penalty being waived for 2021 and 2022, that the missed RMD will not have to be taken.

It is important to note that this Notice only applies to inherited IRAs that fall under the SECURE Act (original owner passing since December 31, 2019). Inherited IRAs from before the SECURE Act continue to operate under the rules that  include annual RMD requirements. If those RMDs are not taken, a 50% penalty of the amount not withdrawn is enforced by the IRS.

What RMD Rules Apply?

The relationship to the owner of the retirement account dictates the options the beneficiary has as to how the inheritance is handled and what RMD rules apply.


If the owner and the beneficiary were married, the surviving spouse has two main options available. The first option is that the surviving spouse can declare the IRA/Roth IRA as their own and move it to a new or existing retirement account in their own name. The RMDs would then be apply to the account based on the beneficiary’s age (RMDs are required to start in the year an individual reaches age 72). The second option for the surviving spouse is to move the account to an Inherited IRA. When this choice is selected, the RMD is taken each year and based on the recipient’s own life expectancy (see here for an IRS chart on the subject). The surviving spouse’s age and income needs should play a role in determining which option to use. It is interesting to note that neither of these choices were altered by the passage of the SECURE Act.


If the owner and the beneficiary were not spouses, the largest change has occurred. For inherited accounts before the SECURE Act, a beneficiary could move the assets to an inherited IRA and stretch out the required distributions over their own lifetime – this is referred to as a stretch IRA. The SECURE Act changed this option. If the original owner is deceased on or after January 1, 2020, the non-spousal beneficiary still moves the assets to their Inherited IRA or Roth IRA. However, the new rules state that the inherited account needs to be completely distributed in 10 years following the death of the owner. The annual distribution requirement is no longer there. A beneficiary could receive distributions each year over the 10-year window, but it is not required. The only requirement is that the inherited account be fully depleted in that timeframe.

Please note that any time a distribution is processed, it is considered taxable income for that calendar year. Inherited Roth IRA distributions are tax-free as long as the funds were in the originating account for five years. (The earnings would be taxable if held for less than five years).

There are exceptions that can eliminate the 10-year requirement for non-spousal beneficiaries. With the exception, a beneficiary would move the assets to an inherited IRA/Roth IRA and take the RMDs based on their own life expectancy. Those that qualify for an exception are the following: person who is not more than 10 years younger than the original account owner, the minor child of the original account holder or a beneficiary that is chronically ill or disabled. In these instances, the RMD can proceed under the beneficiary’s life expectancy.


Some retirement account holders choose to name an entity (like an estate, trust or charity) as the beneficiary of their IRA. The determining factor of how the distributions are required is based on the age of the original, deceased account holder. If the holder was 72 years old at the time of passing, the distribution can be taken over the life expectancy of the original IRA owner. If the IRA holder was under age 72, the inherited account would need to be distributed in full by the fifth year after the owner passed.

Prepare to Implement the New Rules Today

Remember, beneficiaries always have the option to take distributions larger than the required amount or on a faster time schedule. Recipients can also take a lump sum distribution at the time of inheritance. Due to the many options available, it is important to review your situation with a tax and financial advisor. Please contact our team for assistance.

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