As we navigate the complexities of inherited retirement accounts, staying informed about the latest rules and regulations is more important than ever. Many non-spouse beneficiaries are familiar with the confusion surrounding Required Minimum Distributions (RMDs) from inherited IRAs. The IRS has issued new guidance for 2025, providing much-needed clarity. Understanding these changes can help beneficiaries avoid penalties and effectively manage their inherited accounts.

The SECURE Act of 2019 & 10-Year Rule

The SECURE Act of 2019 introduced a significant change: most non-spouse beneficiaries must withdraw the full balance of an inherited IRA within 10 years. Initially, beneficiaries assumed that distributions could be postponed until the final year. However, the IRS later clarified that if the original account owner had already begun RMDs, annual withdrawals were required. This update caused widespread confusion, which the IRS's new 2025 guidance aims to address, impacting how future distributions are handled.

Relief for Missed RMDs (2021-2024)

To alleviate some of the confusion, IRS Notice 2024-35 provides temporary relief for those who failed to take RMDs between 2021 and 2024. This applies exclusively to IRAs inherited from account holders who had already started their RMDs. Beneficiaries who missed these withdrawals during the specified period can now understand more clearly how to proceed without incurring penalties.

New RMD Rule for 2025

Starting January 1, 2025, the temporary waivers for missed RMDs will no longer be available. Beneficiaries must plan to meet annual withdrawal requirements to comply with transfer rules effectively. Understanding these new regulations is vital to ensure that beneficiaries do not face unnecessary penalties in the future.

Who Is Exempt from the SECURE Act Withdrawal Rule?

While most non-spouse beneficiaries are subject to the ten-year rule, some groups are exempt, including:

• Surviving spouses
• Minor children (under 21)
• Individuals with disabilities or chronic illness
• Non-designated beneficiaries (such as charities and estates)
• Accounts inherited before 2020

Recognizing these exemptions is crucial for beneficiaries planning their future strategies.

In conclusion, the 2025 updates to RMDs and inherited retirement accounts highlight the importance of understanding and complying with the latest IRS guidance. Beneficiaries should review their withdrawal strategies and consult with a financial advisor to ensure compliance and optimize their financial planning. By staying informed, beneficiaries can effectively manage their inherited accounts while avoiding unforeseen penalties.