Investors who have inherited an IRA from a parent, grandparent, or another non-spouse investor prior to 2020, could choose to take required minimum distributions over their lifetime, calculated using the IRS Single Life Expectancy table and the account balance. For a young beneficiary, a longer payout period allowed for smaller annual distributions and many more years of tax-deferred growth.
As I often caution investors, tax rules are subject to change, and indeed, they have! Because of changes associated with the SECURE Act of 2019, all non-spousal beneficiaries are now required to deplete the account within 10 years of any decedent who has passed away after 2019. Remember, Congress creates tax laws through the Internal Revenue Code, but it is the IRS that interprets how the law applies to various situations. When the Act first passed, annual required minimum distributions were not mandatory; the only rule was that the Inherited IRA account balance needed to be withdrawn by the 10th year. In May 2021, IRS Publication 590-B reflected this original assumption.
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