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Confusion Over New Rules for Inherited IRAs

Inherited IRAs being written on a piggy bank

When both death and taxes are involved, one can expect significant confusion. Indeed, a recent web search on the term “inherited confusion” turned up many articles, but the third result linked to a Wall Street Journal article on the changes made to inherited individual retirement arrangements (IRAs) by the SECURE Act. An article on inherited IRAs should not be a surprise, given the ambiguity in the legislation and the IRS’s revisions to rules.

Before this provision became law, beneficiaries of inherited IRAs or qualified plans could take distributions from an IRA over the balance of their expected lifetimes. Because the beneficiaries were typically younger than the owners of the IRAs, they generally could stretch distributions from inherited IRAs over a long period of time. Relatively small distributions likely would not change their tax planning dramatically. Thus, they could plan for a modest amount of income stretched over the rest of their lives.

Some in Congress did not like this, however, because it slowed the U. S. Treasury’s receipt of taxes on inherited retirement plan distributions, as they trickled in at a slow pace. It received the moniker “stretch IRA” because it enabled the distributions to be received over a time stretched out far longer than the original IRA owner’s lifetime.

Changes in the SECURE Act

The SECURE Act sharply curtailed the stretch IRA. It shortened the period for distributions from the balance of the beneficiary’s life to 10 years. Except for surviving spouses and eligible designated beneficiaries, the new law required beneficiaries of IRAs to withdraw all remaining funds within 10 calendar years of the calendar year of the original owner’s death, assuming they died after the required beginning date. Consider an IRA worth $100,000 on December 31, 2021, left behind by an 80-year-old, who had earlier named four adult children as IRA beneficiaries. They must plan to distribute the proceeds by December 31, 2031, as the year 2031 marks the 10th anniversary of their parent’s passing.

Congress included very few details when it reduced the time over which distributions from inherited IRAs must be taken. The SECURE Act just states that all distributions must be taken within 10 years while imposing no requirements on the rate at which they must be taken. This left most to assume that the proceeds could be distributed at any time within the 10 years, even on the last day of the last calendar year.

Reflecting this interpretation, the version of Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs), for 2020 and 2021 stated simply:

The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death… The beneficiary is allowed, but not required, to take distributions prior to that date. [emphasis added]

But a funny thing happened on the way to the forum. In February 2022, the IRS issued proposed regulations requiring annual distributions from the inherited IRA, not just at the end of the 10-year period. In this, the IRS applied IRC §401(a)(9)(B)(i) to require annual distributions to be taken based on the beneficiary’s age, presumably using the single-life table. The relevant portion of this clause reads as follows.

[T]he remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used under subparagraph (A)(ii) as of the date of his death.

Following this logic, the IRS proposed that beneficiaries be required to start distributions during the calendar year following the original owner’s death, assuming that the required minimum distribution (RMD) had already been received for the year of death. For example, if an IRA owner aged 75 died in 2021, having already started RMDs, their beneficiaries would be required to start distributions no later than December 31, 2022.

The proposed regulations contain an example in which an employee dies after their required beginning date, making their beneficiaries responsible for taking distributions in the following years until the calendar year concludes, which includes the ninth anniversary of the employee’s death. The remaining balance of the employee’s interest in the IRA or qualified plan the following year must be distributed entirely.

The change in law does not only apply to traditional IRAs, being either individual retirement accounts or individual retirement annuities. It also applies to Roth IRAs, annuity contracts, custodial accounts, 403(b) retirement accounts, and 457(d) eligible deferred compensation plans. It also applies to collective bargaining agreements and governmental plans, although the regulations become effective at different times.

Retirement plans maintained according to collective bargaining agreements are subject to a complicated set of effective dates. The proposed regulations become effective on the earlier of the following.

    • December 31, 2021
    • The later of either the date on which the last of collective bargaining agreements ends or December 31, 2019

Governmental plans have their own effective date, possibly leading to some interesting consequences when a decedent has both IRA and a governmental plan. The SECURE Act became effective for these plans only after December 31, 2021, two years later than for IRAs. For example, beneficiaries of both an IRA and a governmental plan set up by a person who died on December 30, 2021, would see an interesting distinction between these plans. The assets of the IRA must be distributed by December 31, 2031. But the assets of the governmental plan could be distributed over the rest of the beneficiaries’ lives because they would not be covered by the SECURE Act.

The Announcement of August 2022

As originally drafted, the IRS’s proposed regulation would have taken effect immediately, prompting many comments. Beneficiaries of inherited IRAs who did not take RMDs in 2021 or 2022 were motivated to respond, as they would have been subject to excise tax penalties for two years. Given that even Pub. 590-B did not mention the RMD requirement until the 10th calendar year following the IRA owner’s death, and the IRS relented. In its August 2022 announcement, the IRS indicated that it would not apply the penalty to RMDs that should have been taken during 2021 and 2022 under the proposed regulations but were not.


Consider the hypothetical case of Faith, an IRA owner who died at age 90 in 2021 after receiving her RMD for the year, leaving a plan worth exactly $100,000 on December 31, 2021. Faith’s only daughter, Hope, turned 65 in 2021 and was the sole beneficiary of her mother’s IRA. She and her tax practitioner relied on the instructions in IRS Pub. 590-B, and Hope did not receive any distributions from the inherited IRA in either 2021 or 2022. In light of the IRS’s proposed regulations, as released in February 2022, Hope should have used the following schedule for her RMDs.

    # Year Hope’s Age Hope’s life expectancy from
Single-Life Table
Required Minimum Distribution
    0 2021 65  22.9 $4,367
    1 2022 66 21.9 4,367
    2 2023 67 20.9 4,367
    3 2024 68 19.9 4,367
    4 2025 69 18.9 4,367
    5 2026 70 17.9 4,367
    6 2027 71 16.9 4,367
    7 2028 72 15.9 4,367
    8 2029 73 14.9 4,367
    9 2030 74 13.9 4,367
    10 2031 75 12.9 56,330
    Total $100,000

This example assumes that the IRA earns no income and does not change in value during the 10 years following Faith’s passing, an admittedly unrealistic assumption made only for illustrative simplicity. The problem is that Hope took no distributions during 2021 and has no plans to during 2022. Technically, she would be liable for an excise tax penalty for failure to receive a minimum required distribution.

With its August announcement, the IRS backed off from applying the new rules for 2021 and 2022, announcing it would impose no penalties for missed RMDs for those years. Considering this, Hope’s schedule of RMDs follows.

    # Year Hope’s Age Hope’s life expectancy from
Single-Life Table
Required Minimum Distribution
    0 2021 65 N/A $0
    1 2022 66 N/A 0
    2 2023 67 20.9 4,785
    3 2024 68 19.9 4,785
    4 2025 69 18.9 4,785
    5 2026 70 17.9 4,785
    6 2027 71 16.9 4,785
    7 2028 72 15.9 4,785
    8 2029 73 14.9 4,785
    9 2030 74 13.9 4,785
    10 2031 75 12.9 61,720
    Total $100,000

Under the schedule indicated in the August 2022 announcement, Hope’s RMDs do not start until 2023. Because of the shorter distribution period, in the years 2023 – 2030, she receives distributions that are 9.6% greater. Again, the example assumes that the IRA does not grow.

Even with the slower schedule, the example illustrates several issues that did not shift with the August IRS announcement.

    1. The counting starts with the year of death, not the year in which the IRS can start to assert penalties for missed RMDs, which is 2023 under Announcement 2022-53. Regardless of when beneficiaries take distributions during the nine years following the IRA owner’s death, they must completely distribute their inherited IRAs by the end of the 10th anniversary year of the IRA owner’s death.
    2. The age of the IRA’s beneficiary determines how they use the single-life table. In our example, Hope turned 65 in the year following her mother’s death. Consequently, her remaining life expectancy for the year of the first RMD, 2023, is 20.9. The applicable regulation refers explicitly to the beneficiary’s age in the year following the owner’s death.
    3. Congress established the 10-year distribution period for inherited IRAs. Thus, the 10-year period requires another act of Congress to change, an unlikely event.
    4. If an IRA owner dies before taking their RMD for the year of death, the beneficiaries of the IRA must take the RMD for that year during the calendar year of the owner’s death.

Although certain aspects of this are etched in stone, there is one aspect of this law and the associated regulations that may need to be addressed. The IRS based its proposed regulations on the language that requires distributions to be made “at least as rapidly” as

[A] period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary.

The IRS could interpret this as requiring a catch distribution for the years following death for which no RMDs were taken. For example, if the IRS asserts this interpretation, three years’ distributions would be required in 2023 in the previous example with Faith and Hope, including those distributions for the years 2021, 2022, and 2023. It is believed that the IRS is not likely to make this assertion, as it most likely would have been discussed in the 64 pages of regulations proposed in February 2022 or in the much shorter clarification made in August 2022.


Beneficiaries of IRAs inherited in 2020, 2021, or 2022 should plan on receiving distributions from that IRA or qualified plan in 2023. That distribution should be at least as large as the RMD that would be indicated given their life expectancy and the age they attain on their 2023 birthday. Although both death and taxes are involved, we trust that the principles discussed clear some of the “inherited confusion” that has arisen with inherited IRAs. Practitioners should also be alert for further updates to retirement plan rules, as a SECURE Act 2.0 has been introduced in the House of Representatives.

By John W. Richmann, EA, MBA
Tax Materials Specialist, U of I Tax School



IRC §401(a)(9)(A)(ii).

IRC §403(b).

IRC §408A.

IRC §457(d).

IRC §4947(a).

The SECURE Act, PL 116-94, §401(b)(2).

Treas. Reg. §1.401(a)(9)-9(f)(2).

87 Fed. Reg. 10,504–10,567 (Feb. 24, 2022).

IRS Ann. 2022-53, 2022-45 IRB 437.

IRS Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs), pp. 11 and 48. (2021).

IRS Changes Guidelines for Inherited IRAs, Causing Confusion and Pushback. Ebeling, Ashlea. Aug. 1, 2022. Wall Street Journal. [

Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact if you have more up-to-date, supported information and we will create an addendum.

University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.

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