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Robert Bloink and William H. Byrnes
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What You Need to Know

  • Clients should continue to pay close attention to final IRS regulations on these RMD rules.

Update: On July 14, the IRS clarified that IRA beneficiaries subject to the 10-year rule do not need to take required minimum distributions in 2023 from accounts they inherited in 2020 or later.

The IRS has thrown a couple of curveballs when it comes to interpreting the new 10-year payout rule for inherited IRAs post-Secure Act.

First, nearly two years in, it announced that annual required minimum distributions (RMDs) would be required for beneficiaries of account owners who were already in pay status at the time of death. Later, it provided penalty relief for taxpayers who failed to take those RMDs in 2021 or 2022.

That penalty relief ends as of 2023, absent further action. All of this leaves beneficiaries looking forward to 2023 and wondering how their 2023 RMDs should be calculated given the blanket RMD waiver for 2021 and 2022.

While it’s possible that the rules could change, we do have some clues as to how those 2023 RMDs should be calculated — although advisors should continue to carefully watch for updated IRS guidance or final regulations.

10-Year Rule and RMDs: Background

As most clients understand, beneficiaries who inherit IRAs and do not qualify as eligible designated beneficiaries are now subject to the “10-year rule.” The 10-year rule functions much like the old five-year rule. Beneficiaries must empty the inherited account within 10 years of the account owner’s death, meaning that they can only stretch their tax liability over that 10-year period.

When the new rule was first announced, most experts expected that annual RMDs would not be required during the 10-year distribution period. In other words, it was expected that beneficiaries could wait until year 10 to empty the account completely and remain in compliance.

In proposed regulations, however, the IRS announced that the opposite was true if the original account owner had already begun taking RMDs during their lifetime. In other words, if the owner died after his or her required beginning date, the beneficiary would be required to take annual distributions from the account over the 10-year distribution period and would not be permitted to wait and withdraw the entire amount as a lump sum.

If the original account owner died before the required beginning date, no annual RMDs are required, and the beneficiary could elect to withdraw the entire account balance as a lump sum in year 10. That same rule dictates whether the successor beneficiary will be required to take annual RMDs after the successor inherits the account from the original beneficiary.

In 2022, the IRS announced penalty relief so that inherited IRA beneficiaries who failed to take annual RMDs in 2021 and 2022 would not be subject to the otherwise applicable 50% penalty for failure to properly take RMDs.

How Will 2023 RMDs Work?

The IRS hasn’t come out and directly told taxpayers that inherited IRA RMDs are waived for 2021 and 2022. However, because no penalty will apply and because the IRS has offered no corrective procedures for taking those missed RMDs, most experts assume that no RMDs will actually be required in 2021 and 2022.

While we don’t know exactly how the IRS will handle the situation, it seems that all other generally applicable rules remain the same. That means that the inherited account owner’s 10-year distribution period will not change due to the missed RMDs. So, if an account owner died in 2020, the account must still be emptied by Dec. 31, 2030.

Further, it appears that 2023 RMDs will be calculated in the same way that they would have been calculated absent the penalty waiver. In other words, they’ll be calculated as though the 2021 and 2022 RMDs had been taken. Typically, RMDs are calculated using the account balance as of Dec. 31 of the prior year and the taxpayer’s applicable life expectancy factor (determined using IRS life expectancy tables and the inherited account owner’s age).

2023 RMDs should be calculated using the account balance as of Dec. 31, 2022, and the applicable life expectancy factor that would have applied if the 2021 and 2022 RMDs had actually been taken.

Unless the IRS determines otherwise, the missed 2021 and 2022 RMDs are completely ignored for purposes of calculating 2023 RMDs.


Clients who inherited IRAs and relied on the fact that the account could be emptied in year 10 got a valuable reprieve from penalties in 2021 and 2022. However, they should continue to pay close attention to final IRS regulations on these RMD rules — which could possibly change the rules for calculating RMDs in 2023.

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