SECURE Act 2.0: Final Regulations

Written By: Brian Ellenbecker, CFP®, EA, CPWA®, CIMA®, CLTC®

On July 18, 2024, the IRS issued the final regulations for the SECURE Act, ending a four-year wait. The final regulations provide clarity on numerous provisions included in the SECURE Act that tax experts were previously unclear on.

Required Distributions on Inherited Accounts

The biggest question outstanding was whether non-spouse beneficiaries who inherited a retirement account (non-eligible designated beneficiaries) due to a death in 2020 or later and the IRA owner died after their required beginning date would have to take annual required minimum distributions (RMDs) during the 10-Year Rule window. The answer to this question is YES! Starting in 2025, annual distributions from these accounts are now required.

Below is a chart of the distribution rules for all retirement account beneficiaries, factoring in the IRS’ final regulations for the SECURE Act, which primarily impact the box highlighted in red.

 

If death occurs prior to the IRA owner’s required beginning date, no annual distributions are required.

The RMD amount is calculated the same way as it was for life expectancy distributions prior to the 2020 rule change. The beneficiary looks up their life expectancy in the year after death using the IRS’ Single Life Table and will use that number as the divisor in the first year. You subtract one from that number for each subsequent year a distribution is required.

There were quite a few other rules clarified as part of the final regulations, which are not discussed here due to their nuance and complexity.

As you can see from the above chart, the rules have become much more complicated. If you inherited an IRA in 2020 or later, reach out to your Shakespeare advisor to ensure all the rules that apply to you are followed and to answer any questions you may have.