Are RMDs Required for Inherited IRAs in 2021?
The topic of Required Minimum Distributions (RMDs) from Inherited IRAs has been a subject of great interest and debate among retirement planners and individuals alike. As the 2021 tax year approaches, many are asking whether RMDs are still required for inherited IRAs. This article aims to provide a comprehensive overview of the current regulations and guidelines regarding RMDs for inherited IRAs in 2021.
Understanding RMDs and Inherited IRAs
RMDs are the minimum amounts that must be withdrawn from certain retirement accounts, such as traditional IRAs, once the account holder reaches a certain age. For inherited IRAs, the rules can be a bit more complex. In 2021, whether RMDs are required for inherited IRAs depends on the relationship between the original account holder and the inheritor.
Spousal Inheritors and RMDs
If the inherited IRA is passed on to a spouse, the surviving spouse can treat the inherited IRA as their own and continue making contributions to it. In this case, RMDs are not required until the surviving spouse reaches the age of 72. This allows the surviving spouse to enjoy the benefits of the inherited IRA while deferring taxes on the withdrawals.
Non-Spousal Inheritors and RMDs
For non-spousal inheritors, such as children, grandchildren, or other individuals, the rules are different. In 2021, non-spousal inheritors are generally required to take RMDs from inherited IRAs. However, the rules for calculating and taking these RMDs are different from those for original account holders.
Calculating RMDs for Non-Spousal Inheritors
To calculate RMDs for non-spousal inheritors, the inherited IRA must be valued as of the date of the original account holder’s death. The inherited IRA is then divided by the life expectancy of the inheritor, as determined by the IRS Single Life Expectancy Table. This calculation helps determine the minimum amount that must be withdrawn each year.
Exceptions and Modifications
While RMDs are generally required for inherited IRAs in 2021, there are some exceptions and modifications to the rules. For example, if the original account holder passed away before reaching the age of 72, the inheritor may not be required to take any RMDs until the year after the original account holder would have turned 72.
Conclusion
In conclusion, the answer to the question “Are RMDs required for inherited IRAs in 2021?” is not a straightforward yes or no. The rules depend on the relationship between the original account holder and the inheritor. While spousal inheritors may defer RMDs, non-spousal inheritors are generally required to take RMDs based on their life expectancy. It is essential for individuals to consult with a financial advisor or tax professional to understand the specific rules and regulations that apply to their situation.
