Post-2019 Beneficiary Distributions
The 2019 SECURE Act significantly changed the beneficiary RMD requirements for years after 2019 and introduced a new category of beneficiary called an “eligible designated beneficiary”. Thus, there are four categories of beneficiaries after 2019:
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Surviving Spouse
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Eligible Designated Beneficiary
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Designated Beneficiary
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Trust
The following is a summary of the distribution rules applicable to the categories of beneficiaries:
IRS Clarifies Potential RMD Penalty for Recent Inherited Plans
Proposed regulations of changes made by the SECURE Act would require certain beneficiaries of IRAs and other retirement plans inherited from decedents dying after 2019 to make annual withdrawals from the plans during the 10 years after the decedent’s death, rather than being able to wait until the 10th year to fully distribute the account. Under the proposed regs the required withdrawals would apply to heirs other than a surviving spouse, those chronically ill or disabled, and a minor child of the decedent.
This interpretation meant that distributions should have occurred in 2021 and 2022, even though the proposed regs weren’t issued until February 2022, and many tax professionals and commentators expected that no distributions would be required until the 10th year. This raised the possibility that the penalty for failing to take required minimum distributions might apply for 2021 and 2022.
The IRS, in October 2022, issued Notice 2022-53 stating that any final regulations on this issue will apply no earlier than the 2023 distribution calendar year. And failing to make distributions not be subject an RMD penalty.
Then in July 2023 IRS issued Notice 2023-54 indicating the final regs would not apply until 2024, thus extending the penalty moratorium through 2023. This means beneficiaries subject to the 10-Year rule will not be subject to a penalty for not taking an RMD in 2021 through 2023.
More recently (April 2024), the IRS issued Notice 2024-35, announcing a further extension of the penalty moratorium. The IRS intend to issue regs related to RMDs that will apply for purposes of determining RMDs for calendar years beginning on or after January 1, 2025. This means beneficiaries subject to the 10-Year rule will not be subject to a penalty for not taking an RMD in 2021 through 2024.