For taxpayers that are the beneficiary of an IRA or other retirement account, The SECURE Act changed the Required Minimum Distribution (RMD) rules for inherited IRAs.  Under the new rules, there had been uncertainty pertaining to inherited IRA RMDs not clearly spelled out within the SECURE Act.  As a result, IRS Notice 2022-53 was drafted to clarify the new rules.  Final regulations are expected in 2023 but have not yet been issued.

Included in the SECURE Act were new rules for individuals who died after December 31, 2019, and passed on retirement accounts to beneficiaries.  The new rules required the designated beneficiary’s inherited IRA to be fully distributed within 10 years of the death of the deceased retirement account owner.  However, the distribution rules differ depending on whether or not the deceased individual had met their Required Beginning Date (RBD) to take required retirement plan distributions.  As explained in IRS Notice 2022-53:

For taxpayers that inherit an IRA and the Required Minimum Distributions (RMDs) have already started for the original retirement account holder, then:

  1. The designated beneficiary must continue to take annual RMDs over the life expectancy of the designated beneficiary, and
  2. The inherited IRA must be fully distributed by December 31 of the 10th year following the year of the original retirement account owner’s death.

For taxpayers that inherit an IRA and the Required Minimum Distributions (RMD’s) have not begun because the original account owner died before their RBD, then:

  1. The designated beneficiary is not required to take any annual RMD’s in years 1 – 9, but has the option of doing so if they choose, and
  2. The inherited IRA must be fully distributed by December 31 of the 10th year following the year of the original retirement account owner’s death.

Resulting from SECURE Act’s lack of clarity relating to RMDs, for taxpayers that may have missed RMDs for the years 2021 and 2022, the IRS has provided an automatic waiver of penalty for those RMDs not taken.