In 2020, the SECURE Act published new rules relating to required minimum distributions (RMDs). Due to the COVID-19 pandemic, Congress had initially suspended enforcement of the new rules for RMDs; however, the rules have been restored and here are four things to know:
- The SECURE Act pushed the required beginning date for RMDs to age 72. Therefore, if you turn 72 this year, then you must begin taking distributions from qualified plans and IRAs by April 1st, 2023.
- RMD rules apply to both employer-based qualified retirement plans and traditional non-qualified IRAs. Roth IRAs – unless they are inherited* – are exempt from distributions.
- The amount of your annual RMD depends on the value of the account as of December 31 of the prior year. You may take more than the IRS-required amount, but make sure you consider factors such as: your overall cash flow needs, tax implications, and overall estate plan, before taking more than required.
- Inherited accounts should be examined closely. *For inherited accounts where the original owner died after 2019, a non-spouse beneficiary is generally required to complete withdrawals by December 31 of the tenth year after the original owner’s death. RMD rules for accounts inherited prior to 2020 are calculated differently. Spousal beneficiaries have greater flexibility than non-spousal beneficiaries, including being able to treat the account as his or her own, regardless of when the original owner died. The RMD rules are complicated, containing several exceptions, tricks, and traps, so it is important to consult with a qualified professional who understands the law and can help you navigate through the new rules and do what is best for you/your family.
For assistance with your RMDs or other legal matters associated with Business or Estate Planning, please contact Fournier Legal Services at 860.670.3535 or firstname.lastname@example.org.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.