IRS Waives 2024 RMDs for IRA Beneficiaries Under 10-Year Rule

By Melanie Waddell

News April 17, 2024 at 10:19 AM

Share & Print

The Internal Revenue Service has waived required minimum distributions in 2024 for beneficiaries under the 10-year rule.

"Here we go again," IRA and tax specialist Ed Slott of Ed Slott and Co., told ThinkAdvisor Wednesday in an email. "For the 4th year, IRS has waived RMDs for IRA beneficiaries who were subject to RMDs under the 10-year rule. This shows how complicated these beneficiary RMD rules have become."

The IRS made the announcement in Notice 2024-35, released Tuesday.

"While this RMD relief sounds good, it might not be a good long-term tax strategy for beneficiaries," Slott said.

Under the 10-year rule, he explained, "the entire inherited IRA balance must be withdrawn by the end of the 10th year after death. This could result in a boatload of taxes in that year for beneficiaries. The better move for many beneficiaries is to take distributions throughout the 10-year term, even if not required, in order to smooth out the overall tax bill and take advantage of our current low tax brackets. These current tax brackets remain for only this year and next year."

Unless Congress acts, Slott continued, "tax rates are scheduled to increase in 2026. Yes, IRS RMD relief sounds good, but advisors should be helping their clients keep tax bills low and maybe decline this IRS relief."

Remember, Slott warns, "that paying the tax on RMDs is not an 'if' but a 'when.' These taxes will have to be paid, so may as well get the funds out when the tax rates are the lowest, which for many is right now. Deferral in this case may be a short-sighted and expensive tax strategy."