Major legislation since 2019 has significantly changed the rules and planning opportunities of qualified retirement accounts. We now have additional clarifications from the IRS regarding Required Minimum Distributions (RMDs) following the SECURE Act (2019) and SECURE 2.0 (2022).
Key points include:
10-Year Rule for Non-Eligible Designated Beneficiaries: This rule requires non-eligible beneficiaries (typically non-spouses) to fully distribute inherited retirement accounts within ten years of the account owner's death. Notably, if the original owner had started RMDs before their death, beneficiaries must also take annual RMDs during the 10-year period starting in 2025.
Eligible Designated Beneficiaries: These include surviving spouses, minor children, disabled, chronically ill individuals, and those close in age to the deceased. They may continue "stretch" distributions over their life expectancy or choose to use the 10-Year Rule. An employer plan may require beneficiaries to use either the Stretch method or the 10-Year-Rule.
Spousal Beneficiaries: Surviving spouses have more flexibility. They can choose between treating an inherited account as their own, continuing stretch distributions, using the 10-Year Rule, or utilizing a newly introduced "spousal election" to be treated as the deceased spouse and delay RMDs until the deceased spouse's original RMD age.
Trust Beneficiaries: New regulations clarify how RMDs apply to trusts designated as retirement account beneficiaries. See-Through Trusts can be categorized as either "conduit" or "accumulation," affecting whether distributions follow the 10-Year Rule or life expectancy.
Undistributed RMDs: If the account owner dies before completing their RMD for the year, the beneficiaries must satisfy this remaining RMD but can do so in any proportions they choose.
Overall, these regulations add significant complexity to post-death distribution planning for retirement accounts. Advanced planning is crucial in navigating these intricate rules and optimizing tax strategies for beneficiaries.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.
SECURE Act 2.0 - Final Regs
December 20, 2024 by Mike Antonacci
Major legislation since 2019 has significantly changed the rules and planning opportunities of qualified retirement accounts. We now have additional clarifications from the IRS regarding Required Minimum Distributions (RMDs) following the SECURE Act (2019) and SECURE 2.0 (2022).
Key points include:
Overall, these regulations add significant complexity to post-death distribution planning for retirement accounts. Advanced planning is crucial in navigating these intricate rules and optimizing tax strategies for beneficiaries.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.