Concerns Arise Over Waived Withdrawals for Inherited Retirement Accounts

The IRS has waived required withdrawals for some taxpayers who inherited retirement accounts since 2020, but experts warn it may not benefit heirs. The agency has extended relief for certain heirs facing changes in required minimum distributions (RMDs) rules for inherited retirement accounts, a move that experts argue may create confusion and potential financial risks. Since the Secure Act of 2019, heirs are no longer able to “stretch” withdrawals over their lifetime, facing instead a 10-year deadline to empty inherited accounts, which could lead to higher tax liabilities. The latest IRS update grants penalty relief for missed RMDs in 2024 for non-eligible designated beneficiaries subject to the 10-year rule, but the accounts must still be emptied within the original timeline. While this extension may seem beneficial, financial planners caution against delaying decisions due to potential tax implications, especially with looming changes in tax brackets.

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