Changes to Inherited IRA Distributions

If you’ve inherited an IRA after 2019 and are under the 10-year payout rule, some recent news from the IRS could affect your required distributions [1]. We want to alert you to these changes and describe how they might impact your financial planning.

Background: In 2019, the Secure Act introduced a new rule requiring most non-spousal IRA inheritors to liquidate the account within ten years after the original account owner’s passing [2]. Following this, the IRS proposed regulations in February 2022, suggesting an additional annual requirement for certain non-spousal beneficiaries that inherited an IRA from someone already taking Required Minimum Distributions (RMDs). However, possibly due to confusion, the IRS waived these yearly requirements for the 2021 and 2022 tax years, as stated in Notice 2022-53 in October 2022 [3].

Fast forward to July 14, 2023, the IRS has once again waived the annual retirement requirement for these distributions for 2023, as indicated in Notice 2023-54 [1].

If this situation applies to you, we encourage you to meet with your Frontier advisor to discuss the implications of these changes on your financial plan. Although the IRS has waived the annual requirement, it may still be beneficial for you to consider taking a withdrawal in 2023 instead of opting for an income tax deferral until the tenth year.

Understanding the impact of these regulations on your inherited IRA is crucial for making informed decisions about your financial future. We are here to assist you in navigating these changes so that your financial plan remains on track.

References:

[1] IRS Notice 2023-54. Retrieved from the Internal Revenue Service website: https://www.irs.gov/pub/irs-drop/n-23-54.pdf

[2] The Secure Act of 2019. Retrieved from the U.S. Congress website: https://www.congress.gov/bill/116th-congress/house-bill/1994/text

[3] IRS Notice 2022-53. Retrieved from the Internal Revenue Service website: https://www.irs.gov/pub/irs-drop/n-22-53.pdf

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Changes to Inherited IRA Distributions

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