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Post by yogibearbull on Apr 13, 2021 15:03:32 GMT
Duplicate Posting from Elsewhere IRS surprise - the 10-yr rule for Inherited T-IRA for nonspouses/noneligible-taxpayers will require RMDs during the 10-yr required withdrawal period. This also resolves confusion with the old 5-yr old rule. So, if the RMD is not taken in the first year when required, nonspouses/non-eligible-taxpayers will be required to empty the T-IRA in 5 years. And if the RMDs started when required, then the RMDs will continue in years 1-9 with the entire balance withdrawn from T-IRA in the 10th year. LINK IRS 590-B www.irs.gov/pub/irs-pdf/p590b.pdf |
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Post by Capital on Apr 13, 2021 17:12:21 GMT
Leave it to the IRS to make things absolutely confusing while calling it "guidance"
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Post by anitya on Apr 13, 2021 18:52:29 GMT
Leave it to the IRS to make things absolutely confusing while calling it "guidance" I have dealt with many countries' tax laws and by a factor of 10 the US tax laws are the most complex - thanks to our politicians. I am assuming the 5 yr vs 10 yr requirement a statutory requirement. No? I am probably some years away from worrying about these rules by then the rules might change. |
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Post by yogibearbull on Apr 13, 2021 19:02:45 GMT
anitya,IRA regulations existed. The SECURE Act of 2019 introduced 10-yr limit for the old stretch for IRA for nonspouses. But some aspects were unclear [whether the old 5-yr rule applied or was voided? whether RMDs were required during 10 years, etc]. So, this new 590-B dated 3/25/21 makes things clear and not as everybody may have thought/guessed. There are also related discussions at M*, Armchairinvesting, Fidelity.
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Post by Capital on Apr 13, 2021 19:51:17 GMT
Leave it to the IRS to make things absolutely confusing while calling it "guidance" I have dealt with many countries' tax laws and by a factor of 10 the US tax laws are the most complex - thanks to our politicians. I am assuming the 5 yr vs 10 yr requirement a statutory requirement. No? I am probably some years away from worrying about these rules by then the rules might change. As long as there is a Congress change will no doubt occur. |
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Post by yogibearbull on Apr 24, 2021 0:39:28 GMT
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Post by retiredat48 on Apr 24, 2021 17:09:43 GMT
Yogi...I am unsure I read your sentence correctly. Is IRS now NOT requiring RMDs for inherited IRAs??
R48
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Post by yogibearbull on Apr 24, 2021 17:18:05 GMT
Let us wait for new 590-B to be sure. But it seems now that 10-yr rule will require emptying the Inherited IRA by nonspouses within 10 years, but no annual RMDs.
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Post by Capital on Apr 24, 2021 18:45:11 GMT
Let us wait for new 590-B to be sure. But it seems now that 10-yr rule will require emptying the Inherited IRA by nonspouses within 10 years, but no annual RMDs. that is what I am reading into what the IRS is now saying. |
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Post by yogibearbull on May 28, 2021 2:17:22 GMT
A revised 590-B has been issued clarifying the 10-yr Rule for Inherited IRAs. Basically, non-spouses (with some exceptions) can exhaust the IRA by the 10th year in any way they like, and annual RMDs are not required. www.irs.gov/pub/irs-pdf/p590b.pdf"10-year rule. The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death. For example, if the owner died in 2020, the beneficiary would have to fully distribute the plan by December 31, 2030. The beneficiary is allowed, but not required, to take distributions prior to that date. The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if the owner died before reaching his or her required beginning date; or (2) the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his or her required beginning date. For a beneficiary receiving life expectancy payments who is either an eligible designated beneficiary or a minor child, the 10-year rule also applies to the remaining amounts in the IRA upon the death of the eligible designated beneficiary or upon the minor child beneficiary reaching the age of majority, but in either of those cases, the 10-year period ends on the 10th anniversary of the beneficiary's death or the child's attainment of majority." Ed Slott has now found another confusion that shouldn't affect most people. It is related to the end of the 10-yr period in some cases - whether the end is on December 31, or on the 10th anniversary of death, or on the date of reaching majority for minors. www.investmentnews.com/irs-clarifies-the-10-year-rule-but-with-added-confusion-206962 |
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Post by retiredat48 on May 28, 2021 3:53:00 GMT
Yogi...do I read the second last paragraph as meaning:
If my 50 year old daughter inherits an my IRA, and is in her third year of receipt of the IRA (she may or may not be taking withdrawals/distributions), then, IF SHE DIES, the beneficiary of her IRA (such as a 20 year old daughter) starts with a new 10 years to fully withdraw??
That is, 13 years may pass from my death date, to make the distributions.
TIA
R48
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Post by yogibearbull on May 30, 2021 11:06:33 GMT
Yogi...do I read the second last paragraph as meaning: If my 50 year old daughter inherits an my IRA, and is in her third year of receipt of the IRA (she may or may not be taking withdrawals/distributions), then, IF SHE DIES, the beneficiary of her IRA (such as a 20 year old daughter) starts with a new 10 years to fully withdraw?? That is, 13 years may pass from my death date, to make the distributions. TIA R48 I re-read pg 10 & 11 with the above situation in mind. Pg 10: " Death of a beneficiary. In general, the beneficiaries of a deceased beneficiary must continue to take the required minimum distributions after the deceased beneficiary's death. However, the beneficiaries of a deceased beneficiary don't calculate required minimum distributions using their own life expectancies. Instead, the deceased beneficiary's remaining interest must be distributed within 10 years after the beneficiary's death, or in some cases within 10 years after the owner's death. See 10-year rule, later." When this is read with other text on pg 10-11 (including the text for 10-yr Rule), I think that the 10-yrs from your passing would still apply. So, no 13 years. The way I am reading this is that if the beneficiary was taking RMDs (if required, and in your scenario, your daughter wasn't), and passes away, the beneficiary-to-beneficiary may use 10 yrs from the date of passing of the beneficiary. In other cases, the date of the passing of the original owner still matters. I don't now why the rules are so twisted and difficult. But this is what happens when some new rules are added to already complex rules. I was hoping that someone else would chime in. But I saw that you posted this question yesterday on Fido site too, and I decided to provide my take on it, and that may not be the correct one. |
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Post by Capital on May 30, 2021 11:38:39 GMT
In the IRA rules the designations of Owner and Beneficiary are defined. The Owner is the person who created the IRA and is the only Owner. Even though a "Beneficiary" will "own" the IRA upon inheritance all owners after the original owner are defined as Beneficiaries. The 10-year rule is related to the death of the Owner and not to Beneficiaries. That is my understanding; and, it was the intent of Congress when it wrote this law.
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