A 10-year clean-out rule generally applies to IRAs inherited after 2019. The funds must be paid to the beneficiary within 10 years after the year of death. So, if an IRA owner dies in October 2024, the beneficiary must clean out the IRA no later than December 31, 2034. Spouses, minor children (until age 21), the chronically ill or disabled, and people not more than 10 years younger than the decedent are exempt from the 10-year rule.
If an IRA owner dies before his or her RMD beginning date, then beneficiaries needn't take annual distributions. They can opt to wait until year 10 to take the money, get yearly distributions, or skip years, provided the IRA is fully depleted by the end of the 10-year period.
If an IRA owner dies on or after his or her RMD start date, then IRA beneficiaries must withdraw at a minimum annual RMDs from the inherited IRA during the 10-year period, generally beginning with the year after the original owner died, and then fully deplete the IRA by year 10 at the latest.
In this situation, the beneficiary generally figures annual RMDs based on his or her own life expectancy, so the younger the beneficiary, the smaller the yearly RMD amounts.
There is relief if the owner died in 2020, 2021, 2022 or 2023. Beneficiaries of IRAs in which the original owner was already subject to RMDs won't be penalized for not taking distributions in 2021-24. They needn't make up for the missed distribution. But they must take an RMD starting in 2025.
Note that although beneficiaries of Roth IRAs inherited after 2019 are also subject to the 10-year cleanout rule, they do not have to take annual RMDs over those 10 years.
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