Planning for Inheriting IRAs

QUICK TAKE: Designated beneficiaries are either spouse (eligible) or non-spouse (non-eligible). Changes require non-spousal beneficiaries to follow specific rules and take the money out within either 5 or 10 years. There are additional considerations when beginning to take funds after required beginning date of the deceased's Required Minimum Distributions (RMD). The rule changes could reduce wealth due to now shorter distribution schedule and should be considered when planning. These rules only affect pre-tax and traditional IRAs.

Designating beneficiaries is an important part of simplifying your finances for a smooth transfer.  The New Secure Act Rules have made changes that you need to be aware of when selecting beneficiaries.

When a spouse or other eligible beneficiary are designated beneficiaries and inherits a pre-tax retirement account, they have several options depending on whether the account holder passed away before or after they were required to start taking distributions. If the account holder died before they had to begin taking money out, the spouse can keep the account as an inherited account and delay distributions until the account holder would have turned 72. They can also choose to take distributions based on their own life expectancy, follow the 10-year rule to withdraw all funds within a decade, or roll the account into their own IRA. If the account holder died after they had started taking distributions, the spouse can keep the account as an inherited account, take distributions based on their life expectancy, or roll the account into their own IRA.
 
Non-eligible Designated Beneficiaries, must follow the 10-year rule without stretch or with stretch distribution rules. If owner died before required beginning date for Required Minimum Distributions (RMD) then there are no additional stretch distributions. If the owner died after the required beginning date for RMDs then the Non-Eligible designated beneficiary is required to follow both rules, continue stretch distributions and have all assets distributed by the 10^th year.

Different rules may apply for beneficiaries that are not individuals. Beneficiaries that are not individuals, such as trusts or estates, continue to follow the rules that applied before 2020 are followed and may be subject to 5-year rule, as the SECURE Act changes only apply to individual beneficiaries.

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Investment advice offered through Mariner Independent Advisor Network, LLC, a registered investment adviser.  ALNA Financial Group, LLC and Mariner Independent Advisor Network, LLC are separate entities.