IRS Waives 2024 RMDs for IRA Beneficiaries Subject to the 10-Year Rule

Wednesday, April 17, 2024


By Ian Berger, JD
IRA Analyst
Follow Us on X: @theslottreport

If you’re an IRA beneficiary subject to the 10-year payout period and would have had a 2024 required minimum distribution (RMD), you’re in luck. In IRS Notice 2024-35, issued yesterday (April 16), the IRS said it would excuse those RMDs.

The SECURE Act provided that most non-spouse beneficiaries of IRA owners (or plan participants) who died in 2020 or later could no longer stretch RMDs over their lifetime. Instead, these “non-eligible designated beneficiaries” became subject to a 10-year payment rule. In its proposed SECURE Act regulations (from February 2022), the IRS surprised everyone by saying that, in addition to the 10-year payout, annual RMDs are required in years of 1-9 of the 10-year period if the IRA owner had died on or after the date his RMDs were required to begin. That required beginning date (RBD) is generally April 1 of the year after the year the owner turns 73.

The IRS position led to widespread criticism and confusion. Recognizing this, the IRS previously excused 2021, 2022 and 2023 annual RMDs for beneficiaries of IRA owners who died in 2020 after the RBD. It also previously waived 2022 and 2023 annual RMDs for beneficiaries who inherited in 2021 after the owner’s RBD. And, it has excused 2023 annual RMDs for beneficiaries who inherited in 2022 after the owner’s RBD.

With Notice 2024-35, this relief within the 10-year payout period is extended even further. The new Notice adds another year of relief by waiving 2024 annual RMDs for beneficiaries of IRA owners who died in 2020, 2021 or 2022 after the RBD. It also excuses 2024 RMDs within the 10-year period for beneficiaries of owners who died in 2023 after the RBD.

So, if you inherited after 2019 and are subject to the 10-year payout rule, you aren’t required to receive annual RMDs for any year before 2025. Even so, it may be a good idea to voluntarily take IRA withdrawals while tax rates are low. Putting off distributions also could mean you’ll face a larger tax bill at the end of the 10-year period.

Keep in mind that the new IRS Notice does not affect lifetime RMDs, RMDs from inherited IRAs by “eligible designated beneficiaries,” or RMDs by beneficiaries who inherited before 2020. It only applies to those beneficiaries with annual RMDs within the 10-year period.

Notice 2024-35 also suggests that, after more than two years, the IRS may finally be ready to finalize its February 2022 proposed regulations sometime later this year.

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