New IRS proposal could affect timing of inherited IRA distributions

If you’ve inherited an IRA in 2020 or later, take note: the wait-until-the-tenth-year approach to distributing the account might no longer work.  Most have interpreted the IRS’ regulation of the 2019 SECURE Act to mean that an IRA inherited in 2020 or later can be distributed out within 10 years, with no requirement as to how much or when during that time.  As long as it’s all done by year 10, it was fine.  But now, the IRS has flipped their position in recently issued proposed regulations, saying that an inherited IRA has to be distributed out during the course of the 10 years (presumably with a divisor of 10, 9, 8, etc.).

Hopefully, the final regulations will be the rules as we understand them to be now. And if not, then there should be some safe harbors for distributions that should have been made in 2021.  Stay in touch with your ShindelRock tax professional, who is monitoring this fluid regulation situation.