When enacted, the SECURE Act stated that designated beneficiaries would be subject to the 10-year rule. Based on the document, we all thought it would work similar to the 5-year rule and that the IRA must be emptied by the beneficiary no later than the end of the 10th year, with no required distribution in the years before the 10th year.
However, two weeks ago, IRS Publication 590-B had us questioning if that interpretation was correct. In the publication, the IRS example of calculating the tax for designated beneficiaries showed that they must take required minimum distributions each year up to the 10th and final year and then empty the account at the end of the 10th year.
However, last week an IRS spokesperson said that this was incorrect. The IRS plans to revise the publication to show that beneficiaries have up to 10 years to withdraw the money with no requirements to pay RMDs in the years leading to the 10th year.
While the chapter of annual RMDs for Designated Beneficiaries opened and closed quickly, the hefty tax due no later than the end of the 10th year continues to linger.
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