Some Inherited IRA beneficiaries subject to 10YR rule may receive an additional year's deferral of mandatory RMD requirements

[LostDollar]

https://www.irahelp.com/slottreport...r-payment-period-and-provides-60-day-rollover

From the article:

If you’re an IRA beneficiary subject to the 10-year payout period and would have had a 2023 RMD (required minimum distribution), you’re in luck. In Notice 2023-54 issued last Friday (July 14), the IRS said it would excuse those RMDs. The IRS also said it would extend the 60-day rollover deadline for IRA (and plan) account owners born in 1951 who received distributions in 2023 that weren’t necessary because of the SECURE 2.0 change that delayed their first RMD year from 2023 to 2024

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[Allen Trent]

I dont believe "they get another year" as they are still subject to emptying it by end of 10th year after death if death of IRA owner was after 1/1/2020.

So, a IRA bene who inherited an IRA in 2020 originally had 10 years they could spread taxes out of. Now, if they failed to take any amount out in 2020, 2021, 2022 & now 2023 they have shrunk the number of tax years to lost taxable income from 10 tax years to 6. That means for many, instead of posting say 10% of the value fir eaxh of 10 years, they either now will post 16%, but more likeky they will take the tiny RMD each of 5 years & take the large lump sum at the last minute in year 10.

The government has not lowered the RMD, has not delayed the start date of RMD & waived inherited RMDs because it is better for you. They know, for most tax payers, the IRS will collect a much larger check later on a lump sum in 1 tax year than they will collect by spreading the money over many years & diluted each year with standard deductions & current lower tax brackets.

The only people that will benefit by kicking an RMD can down to the future will be those possibly still working in a current tax year with a 100% chance their income will be dropping next year, etc

I just dont get this excitement of not taking an RMD by so many in most situations

 

[LostDollar]

I dont believe "they get another year" as they are still subject to emptying it by end of 10th year after death if death of IRA owner was after 1/1/2020.

I wanted to post the link to the article. Not being an annuity technician, I struggled a long time with wording for the post title. That was the best I could finally come up with.

Thread tools allow the OP to edit the thread title. If you give me what you believe annuity specialists would see as a more appropriate title for the thread, I will be happy to change it.

 

[Allen Trent]

I wanted to post the link to the article. Not being an annuity technician, I struggled a long time with wording for the post title. That was the best I could finally come up with.

Thread tools allow the OP to edit the thread title. If you give me what you believe annuity specialists would see as a more appropriate title for the thread, I will be happy to change it.

No worries as about editing it. Any person working with retirement accounts, whether it is an Annuity IRA or CD IRA or brokerage account IRA should know 2024 has no mandatory RMD on an inherited IRA that was put into a 10 year deferral account for a post 2020 death.

 

[LostDollar]

I dont believe "they get another year" as they are still subject to emptying it by end of 10th year after death if death of IRA owner was after 1/1/2020.

So, a IRA bene who inherited an IRA in 2020 originally had 10 years they could spread taxes out of. Now, if they failed to take any amount out in 2020, 2021, 2022 & now 2023 they have shrunk the number of tax years to lost taxable income from 10 tax years to 6. That means for many, instead of posting say 10% of the value fir eaxh of 10 years, they either now will post 16%, but more likeky they will take the tiny RMD each of 5 years & take the large lump sum at the last minute in year 10.

The government has not lowered the RMD, has not delayed the start date of RMD & waived inherited RMDs because it is better for you. They know, for most tax payers, the IRS will collect a much larger check later on a lump sum in 1 tax year than they will collect by spreading the money over many years & diluted each year with standard deductions & current lower tax brackets.

The only people that will benefit by kicking an RMD can down to the future will be those possibly still working in a current tax year with a 100% chance their income will be dropping next year, etc

I just dont get this excitement of not taking an RMD by so many in most situations

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The only people that will benefit by kicking an RMD can down to the future will be those possibly still working in a current tax year with a 100% chance their income will be dropping next year, etc

I don't see that as a true statement.

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I just dont get this excitement of not taking an RMD by so many in most situations

45 years ago there was a tax strategy called timing. It was able to be used for the very wealthy and also for people of much more modest means and estates. Maybe it is not used anymore. I don't know. All I can say is I find it very useful in the second decade of the twenty first century on my own returns.

privsg has the way of it.

@PrivClientSG said in another thread:

I also think that who is the client and how much their retirement plan assets are worth, as well as their estate, is a critical question. There are a lot of critical questions.

That is a great quote. It is the basic guideline answer to your question. Consider each person's critical questions for the tax year in question.

 

[Allen Trent]

I don't see that as a true statement.

Every taxpayer situation varies. But we currently know a couple facts about tax rates. The lower tax rates for various income brackets expire in 2025 & revert back to the higher 2017 tax rates & lower standard deductions. If someone inherited $100k im 2020 & had the chance to take out 10-12k each of 10 years, most taxpayers, especially those already retired, would benefit from all 10 years tax returns to spread the income out, rather than skipping taking RMD from inherited IRA for the 1st 3-4 years the IRS was confused as ti whether RMD were required from a post 2020 inherited IRA. Prior to 2020, when inherited IRA still had the stretch IRA option where people could stretch the payments over 15, 20, 30 & even 55-60 years in my childrens cases, there was never an option to not take an RMD eacb year. I always wondered why people thought there was no RMD needed on post 2020 inherited IRA & enen if there was, why they woukd want to delay unless their individual situation warranted it tax wise.

 

[LostDollar]

Prior to 2020, when inherited IRA still had the stretch IRA option where people could stretch the payments over 15, 20, 30 & even 55-60 years in my childrens cases, there was never an option to not take an RMD eacb year. I always wondered why people thought there was no RMD needed on post 2020 inherited IRA ......................

Wasn't there also a 5 year option for distribution which did not require specific amounts in specific years?

 

[Allen Trent]

Wasn't there also a 5 year option for distribution which did not require specific amounts in specific years?

Yes, the 5 year deferral was always an option before the Secure Act along with thf Stretch IRA inherited RMDs options. Most believed when the government eliminated the Stretch & created the 10 year deferral that it replaced thr 5 year deferral. Then, it was realized the govt was silent on several topics & didnt mention initially that RMDs are required for 10 year deferral. It is a bit of anyone's guess as to what the IRS thinks about the 5 year & in which situations it would apply, of at all. Lasf item i saw from IRS only mentioned 5 year deferral as an option for deaths prior to 2020 Secure Act for all types of beneficiaries & for deaths after 2019, it only was an option for a trust beneficiary

Ironically, 5 year deferral is a death claim settlement option though for NQ annuity

 

[Tahoe Ray]

There is also a no year deferral, a one year deferral, etc.

 

[LostDollar]

The only people that will benefit by kicking an RMD can down to the future will be those possibly still working in a current tax year with a 100% chance their income will be dropping next year, etc

This seems to me to be an oversimplification. It doesn't recognize that tax calculations are the result of interplay between Income, Deductions and Credits. Nor does it recognize that "Income" is not one monolithic category of money coming to a taxpayer or into a household. An individual taxpayer may have multiple types of income and deductions and credits they are eligible for. If we talk about a household, rather than an individual, the situation can become even more complex because it might be important to know which household member income, deductions or credits are associated with.

In the specific situation we are talking about, Inherited IRA's, the 10 year RMD rule, and IRS leniency on requiring RMD's in 2020, 2021, 2022, and 2023, there is a household taxable income shifting opening that may provide benefit to the taxpayer when consideration goes to the full Income-Deduction-Credit picture, rather than just taking the one-size-fits-all concept of RMD's should not be deferred (so Income recognition should not be timed). An example might be obtaining reduction in HealthCare Insurance costs which are hooked to tax filing.