Possible Tax Rule Changes for Non-Spousal IRA Beneficiaries

Joshua Dobi |

Something that is on our radar is a potential update to the Secure Act, which would affect non-spousal beneficiaries of IRAs.


In 2019 Congress passed the Secure Act that revised rules for retirement plans. The Secure Act said that when an owner dies after 2019, many non-spousal heirs of traditional and Roth IRAs and similar accounts must empty the accounts within ten years. Previously heirs had decades to withdraw funds. There were exceptions, such as a spouse or minor, but the rules applied to many heirs. In short, we went from a lifetime of income opportunities to liquidating those accounts within ten years.


Up to now, the IRS has been silent about how exactly an heir does that over the course of ten years. The wording of the Secure Act was vague, so many IRA specialists assumed affected heirs could wait until the 10th year to begin taking payouts. Or maybe someone wanted to take it all in year three or equal distributions over ten years. There were a lot of ways to slice the pie.


Fast forward to February 2022, and the IRS has indicated it may start requiring an annual distribution over those ten years if the original owner died on or before their required beginning date for payouts. The beginning date is April 1, after the year the IRA owner turns 72 years of age under current law.


Again, this isn’t set in stone yet. We expect to hear more from the IRS in the coming weeks. If you are a non-spousal beneficiary, we wanted to get it on your radar and make you aware of what could be coming soon.


If you have questions about your financial space, call us at (412) 928-8801 or visit us at www.oakwoodfinancialgroup.com. If you wish to schedule an introductory meeting, we would be happy to meet with you at no cost or obligation.


These Blogs are provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of SagePoint Financial.