NEW SPOUSAL BENEFICIARY RULES AND EFFECTIVE DATE OF 10-YEAR RULE:  TODAY’S SLOTT REPORT MAILBAG

Thursday, September 19, 2024

By Ian Berger, JD
IRA Analyst

Question:

I inherited an IRA from a younger deceased spouse who wasn’t required to take required minimum distributions (RMDs) until this year. Can I take advantage of the new section 327 rules under SECURE 2.0 since the RMDs haven’t commenced yet?

Answer:

Yes. The recently-released IRS proposed RMD regulations say that section 327 can be used by a surviving spouse who inherits before 2024 as long as the deceased IRA owner would have reached age 73 (the current first year for RMDs) in 2024 or later. The advantage of section 327 is that you can remain an IRA beneficiary (as opposed to doing a spousal rollover) and use the IRS Uniform Lifetime Table (and your age) to calculate RMDs. This will produce smaller RMDs than if you were using the IRS Single Life Table, which was required before section 327. An added benefit of being a spouse beneficiary is that these RMDs will not start until the deceased spouse would have been age 73. (As an alternative, you could elect to have the inherited IRA emptied by the end of the 10th year following the year your spouse died. No annual RMDs would be required in years 1-9.)

Question:

My father passed away in March of 2018 and I inherited his 401(k). I rolled over the 401(k) to an inherited IRA. Do I have to liquidate this IRA by the end of 2028?

Thank you.

Rick

Answer:

Hi Rick,

No. The 10-year payment rule for inherited IRAs applies to most non-spouse beneficiaries (including adult children) of IRA owners who die after 2019. Since your father died in 2018, you aren’t subject to the 10-year rule. You can continue taking annual RMDs over your single life expectancy.

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