What advisors say about the IRS rule for RMDs on inherited accounts

investmentnews.com:

The IRS has finalized its proposed 10-year RMDs rule for inherited retirement assets, and advisors say its NBD.

That’s because the new rule has been coming for years, and despite the more restrictive guidelines that have replaced the old stretch IRA provision, it won’t affect many clients. The rule stems from the 2019 Secure Act and requires a 10-year payout period for most beneficiaries who receive retirement account assets.

Further, the recently published final rule “is not a change to existing rules,” but is a clarification to the requirements Congress passed in the Secure and Secure 2.0 laws, said Erika Safran, principal of Safran Wealth Advisors, in an email. For example, IRA assets inherited since 2020 from account owners who had started taking required minimum distributions before death must be fully distributed within 10 years of being inherited, Safran noted.

“We have been applying this rule and continue to distribute at least the RMD to the beneficiaries,” she said. “This helps to avoid a large final taxable distribution and possible move to higher tax bracket.”

Even so, the IRS has been gentle with the phase in of the new requirements, for the past four years granting exemptions for beneficiaries who missed RMDs on inherited IRA assets.

While the Secure Act eliminated the stretch IRA provisions for most beneficiaries, it made exceptions for “eligible designated beneficiaries.” Those include surviving spouses, minor children of account owners, those who meet disability requirements under IRS rules, people who are chronically ill, as well as beneficiaries who are older or less than 10 years younger than the deceased account owners.

“While the new 10-year RMD requirements will impact some clients, it won’t impact