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Tax News You Can Use

Treasury Issues Guidance on RMD's and Inherited IRA's


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Tax News You Can Use | For Professional Advisors

By Jane Ditelberg, Director of Tax Planning and Mairav Rothstein, Senior Tax Counsel

With the SECURE Act in 2019, Congress made the first significant changes in nearly 20 years to the rules governing required minimum distributions (RMDs) from IRAs and qualified plans, which we will refer to collectively as retirement accounts. More legislation (SECURE 2.0) and proposed regulations followed in 2022. One of the most significant changes SECURE made was to change the “life expectancy rule.” Before SECURE, beneficiaries of virtually all inherited retirement accounts needed to take RMDs based on the beneficiary’s life expectancy. The SECURE Act replaced that rule for most beneficiaries with the 10-year rule.

The New Rules Under SECURE

The life expectancy rule for inherited retirement accounts is based on RMD calculations of the beneficiary’s remaining life expectancy. A beneficiary aged 55, for example, has a life expectancy of more than 31 years, which is much longer than the 10-year period for computing RMDs under SECURE. Using the life expectancy rule results in lower RMDs for that beneficiary than under the 10-year rule, which requires the beneficiary to withdraw all assets by the end of the 10th year following the account owner’s death. Spreading the RMDs over a longer period is an advantage because it postpones the tax.

The following chart illustrates the change from the pre-SECURE life expectancy rule for RMDs to the post-SECURE 10-year rule, assuming a $1,000,000 IRA, an account owner who died at age 70, a 55-year-old non-spouse beneficiary and annual 5% growth in value for the assets in the account. Note that under the pre-SECURE rule, the RMDs would continue for 31 years or until the beneficiary’s death.

The Surprise in the Proposed Regulations

One provision of the proposed regulations upended the general understanding of the 10-year rule applicable to most non-spouse beneficiaries of inherited retirement accounts, if the deceased account owner was over 73. When Congress enacted SECURE, most observers interpreted the language of the 10-year-rule to require the beneficiary to withdraw all assets by the end of the 10th year following the account owner’s death, without any intervening RMDs in years one through nine. However, the proposed regulations require beneficiaries subject to the 10-year rule to take RMDs during the 10-year period when either (a) the account owner died after the due date for taking their own first RMD (currently April 1 of the year following attaining age 73) or (b) the 10-year rule begins after the death of an eligible designated beneficiary’s life expectancy withdrawal period for the same inherited IRA.1 Furthermore, the timing of the issuance of the proposed regulations meant that if the IRS enforced them, many beneficiaries of inherited retirement accounts would have faced penalties for failing to take RMDs they did not know they needed to take.

Taxpayer Relief in Notice 2024-35

In notices issued in October of 2022 and 2023, the IRS notified taxpayers who had inherited retirement accounts subject to the 10-year rule that it would not enforce (or would not impose penalties for failure to take) RMDs for years one through nine for 2021-2023 and left open the possibility that such treatment could be extended to later years. Recently issued IRS Notice 2024-35 does just that, providing that the IRS will not impose penalties for failure to withdraw RMDs for years one through nine from an inherited retirement account subject to the 10-year rule. Notice 2024-35 also notifies taxpayers that long- anticipated final regulations governing RMDs will not apply to years prior to 2024. This can provide comfort to taxpayers subject to the 10-year rule, who have not taken intervening RMDs (in years one through nine) while awaiting the final regulations, that they will not be subject to penalties.

Here are two takeaways from IRS Notice 2024-35:

The IRS will not impose penalties for failure to take year one through nine RMDs in 2024 from retirement accounts subject to the 10-year rule.

This is the same relief granted by the IRS for tax years 2021-2023.


Traditional IRA owner Anne died in 2020 at the age of 80, leaving half of her $1,000,000 IRA to her surviving spouse, Ben (age 82), and half to her adult daughter, Carol (age 55). Ben, as a surviving spouse, must withdraw RMDs based on his own remaining life expectancy for the rest of his life, unaffected by the 10-year rule. However, under the rule in the proposed regulations, Carol is subject to both the 10-year limitation period for deferring distributions and annual RMDs based on her own remaining life expectancy. This would mean taking RMDs in years one through nine and withdrawing all remaining assets by the end of year 10. Moreover, when Ben dies, leaving his interest in the inherited IRA to Carol, Carol must continue to withdraw RMDs based on Ben’s life expectancy during a new 10-year period that begins with Ben’s death, and withdraw all assets by the end of that new 10-year period (sooner if the RMDs exhaust it earlier).

Here is a chart comparing Carol’s required withdrawals for her half of the IRA with and without the rule interpretation in the proposed regulations, assuming she dies in 2031:

What IRS Notice 2024-35 provides is that the IRS will not impose any penalties on Carol if she fails to take an RMD in years 2021-2024. In addition, if the final regulations, expected to come soon but with no definite deadline, do require RMDs for Carol in these circumstances, the notice makes clear that those regulations will not apply to tax years before 2025.

Notice 2024-35 provides that the IRS anticipates that final regulations will apply to years starting on or after January 1, 2025.

This is neither a promise nor a threat, but it is the closest the Treasury has come to signaling an end to the limbo we have been in since the proposed regulations governing RMDs were issued in February of 2022.

A Few Final Thoughts

The 10-year rule does not apply to surviving spouses, to disabled or chronically ill beneficiaries, to the retirement account owner’s own minor children before age 21 or to beneficiaries who are older than or not more than 10 years younger than the retirement account owner. Roth IRA owners do not have any RMD requirements, so beneficiaries of inherited Roth IRAs who are subject to the 10-year rule do not have RMD requirements for years one through nine even under the proposed regulations. Beneficiaries of retirement accounts of deceased account owners should consult their legal and tax advisors for specific details on the RMD rules applicable to their specific situation.


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  1. Examples of rule (b) include the 10-year rule that applies to a successor beneficiary after the death of a spouse or disabled beneficiary. Thus if the surviving spouse of the account owner, who is allowed to use the life-expectancy rule to compute RMDs, dies five years after the account owner’s death, the beneficiary who receives the account after the spouse’s death starts a new 10-year period and must, under the proposed regulations, take RMDs in years one through nine before withdrawing all assets by the end of year 10.


© 2024 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

The information contained herein, including any information regarding specific investment products or strategies, is provided for informational and/or illustrative purposes only, and is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any investment transaction, product or strategy. Past performance is no guarantee of future results. All material has been obtained from sources believed to be reliable, but its accuracy, completeness and interpretation cannot be guaranteed.

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