IRS Extends RMD Relief for Inherited IRAs: What Financial Advisors and Clients Need to Know

The IRS has granted financial advisors, tax professionals, and their clients who inherited individual retirement accounts (IRAs) in the past year or the previous three years an additional 12 months of flexibility. This extension, outlined in an April 16 notice, allows beneficiaries to delay required minimum distributions (RMDs) for another year under the terms of the 2019 Secure Act.

This news comes as a relief to many heirs, providing them with more time for potential growth and compounding without the burden of immediate taxes. Allen Laufer, the director of financial planning at Silvercrest Asset Management Group, described the extension as “welcome news” for those looking to maximize their assets.

For planners and clients looking to minimize estate taxes and RMD challenges in the future, this extra year of relief presents an opportunity to explore trust strategies that can address both issues simultaneously. Theresa de Leon, the national director of sales for Arden Trust, emphasized the importance of understanding each client’s objectives before implementing any strategies.

The IRS notice specifies that the final regulations regarding RMDs will apply for calendar years starting on or after January 1, 2025. This timeline gives heirs and their tax professionals the chance to consider the potential impact of inheriting assets amidst the changing tax landscape, including the potential expiration of lower individual tax rates in 2026.

As the complexities of estate planning continue to evolve, advisors and clients are encouraged to explore various strategies, such as setting up charitable remainder trusts (CRTs) to benefit from tax advantages and ensure a smooth transfer of assets to heirs. Ultimately, the decision to place assets in a trust should consider not only tax implications but also family dynamics and individual circumstances.

With the IRS signaling a shift towards enforcing RMD rules in 2025 and beyond, it is essential for taxpayers to stay informed and proactive in their financial planning efforts. By taking advantage of the extended flexibility provided by the IRS, beneficiaries can navigate the complexities of inherited IRAs with greater ease and efficiency.