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Navigating the New Regulations for Inherited IRAs

Steering a vessel through a narrow passage enveloped in fog can be a dangerous maritime maneuver, as pilots may lack clarity on where to direct their ships. Many books and movies have used foggy settings to build dramatic tension that captivates their audiences.

In somewhat the same way, tax practitioners have navigated the foggy waters of inherited IRAs in the wake of the shorter distribution periods imposed by the SECURE Act. At first, all persons seemed to understand that defined beneficiaries just needed to ensure that inherited IRA accounts were completely distributed within 10 years of an owner’s passing.

However, the IRS introduced a bit of dramatic tension with proposed regulations in February 2022. It stated that even in the nine years after the donor’s death, beneficiaries should generally receive some distributions. In this posting, we want to suggest a way to chart a course through these waters while minimizing the drama of proposed and uncertain regulations. After all, tax practitioners do not need dramatic tension to ensure that their clients do not run aground on the excess accumulation penalty for failing to take required distributions.

Before the SECURE Act

Before this provision in the SECURE Act 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 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.

However, some in Congress did not like this because it slowed the U.S. Treasury’s receipt of taxes on inherited retirement plan distributions, as the revenue trickled in slowly. It received the moniker “stretch IRA” because it enabled beneficiaries to receive the distributions over a time stretched 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 designated beneficiary’s life to 10 years. Except for surviving spouses and eligible designated beneficiaries, the new law required designated beneficiaries of IRAs to withdraw all remaining funds by the end of the 10th calendar year following the original owner’s death, assuming they died after their required beginning date. Consider an IRA worth $100,000 on December 31, 2021, left behind by an 80-year-old who died that year after naming four adult children as IRA beneficiaries. The children must plan to distribute the proceeds by December 31, 2031, as 2031 marks the 10th anniversary of their parent’s passing.

Congress included 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 designated 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 designated beneficiaries responsible for taking distributions in the following years until the end of the calendar year that 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. Collective bargaining agreements and governmental plans must also comply, although the SECURE Act made the rules for these accounts effective at different times.

The Announcement of August 2022

As originally drafted, the IRS’s proposed regulation would have taken effect immediately, which prompted 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 tax penalties for two years. 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 Notice 2022-53, 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. The IRS stated that the proposed regulations would not apply earlier than for 2023 distributions.

The Announcement of August 2023

The IRS weighed in again on this subject this past August. Among other things, IRS Notice 2023-54 provided that the proposed regulations would not be effective earlier than the 2024 calendar year. Thus, excise tax for missed distributions from inherited IRAs will not be assessed for 2021, 2022, or 2023. Assuming the IRS finalizes the proposed regulation in time for 2024 distributions, the following example illustrates how the RMD is calculated for an inherited IRA.


Faith, age 91, died in May 2021 after receiving her RMD from her traditional IRA for 2021. Her daughter, Hope, is the only beneficiary designated in her IRA. Hope was born in 1956 and celebrated her 65th birthday in 2021 before her mother died.

Based on the proposed regulations, Hope must take the first RMD from this inherited IRA on or before December 31, 2022. However, Hope’s tax preparer advised her that, based on IRS Notice 2023-54, Hope can wait until 2024 to take the first RMD. Hope must withdraw any remaining balance in the account by the end of 2031. That year contains the 10th anniversary of her mother’s passing.

Hope decides not to receive a distribution from the IRA she inherited from her mother in 2022, as permitted by IRS notice 2022-53. However, in 2023, Hope chooses to receive a distribution equal to the RMD under the proposed regulations. This action lessens the distribution in 2031 that Hope will need to receive to satisfy the 10-year rule. If the inherited IRA were worth $104,013 on December 31, 2022, Hope’s RMD under the proposed regulation would be $4,953 were it not for IRS Notice 2023-54, which delayed the proposed regulation’s effective date until 2024.

Calculating the RMD amount requires Hope to consult Table I, the single life expectancy table, in IRS Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs). All calculations of RMDs from inherited IRAs start with the beneficiary’s life expectancy in the year following the year of the IRA owner’s death. When Hope turned 66 in 2022, the year following her mother’s death, her life expectancy was 22.0 years. This number corresponds to age 66 in the life expectancy column of Table I. In 2023, Hope’s RMD calculation uses a denominator of 21.0 years, which is one year less than the previous year’s denominator. Thus, Hope’s 2023 RMD would be ($104,013 ÷ 21.0), or $4,953, under the proposed regulations.


Beneficiaries of IRAs inherited in 2020, 2021, 2022, or 2023 should plan on receiving distributions from that IRA or qualified plan in 2024. Although the proposed regulations are not yet final, the IRS does not need congressional approval to finalize them. The 2024 distribution should be at least as large as the RMD that would be indicated given their life expectancy in the year after the IRA owner’s death, adjusted for each intervening year.

We trust this discussion reduces the dramatic tension introduced by the proposed treasury regulations and helps tax practitioners chart clear courses for their clients and their inherited IRAs. Of course, practitioners should be alert for the finalization of the proposed regulations. The topic of inherited IRAs will be discussed in more detail at 2023 Fall Tax School.

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

Note: This post updates and replaces an earlier version that was posted on December 12, 2022.

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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