The New 10 Year Distribution Rule for Inherited IRAs – Not as Simple as First Thought?

In a previous post I wrote about the new distribution rules affecting beneficiaries of IRA accounts inherited after December 31, 2019. Under the new 10-year distribution rule, if an IRA (or other retirement account) owner died after 2019, most non-spouse beneficiaries must withdraw the entire balance of the inherited account within 10 years of the anniversary of the account owner’s death, without requiring annual withdrawals – or so we thought.

At the end of March, the IRS issued it’s revised Publication 590-B, in which the IRS (through poor drafting I hope) indicates on page 12 that the beneficiary must take a distribution in each of years 1-9 during the 10 year distribution period based upon the lifetime distribution table applicable to the beneficiary, with the remaining account balance withdrawn before the end of the 10th year.

Later on the same page the IRS directs beneficiaries subject to the 10 year distribution rule to NOT refer to any lifetime distribution tables. THE SAME PAGE 12! Confuse much?

What is a beneficiary to do? Well, the publication is not official guidance, so maybe the IRS will catch the apparent contradiction and issue a clarification. Saying that, the best course of conduct for beneficiaries subject to the new 10 year distribution rules may be to wait until later in 2021 to hold off taking a distribution to wait and see what the IRS does.

Stayed tuned to this blog. We will let you know if or when the IRS issues a clarification.

But, until then, if you are struggling to manage an inherited IRA or other retirement account, or need help planning for your retirement, give us a call. we can help.