On July 19, 2024, the Treasury Department and IRS issued 260 pages of final regulations implementing the SECURE Act's 10-year rule for inherited retirement accounts (T.D. 10001; 89 FR 58886). ¹ After four years of practitioner uncertainty and three rounds of penalty waivers, the rules are now settled. For closely-held families, the window to restructure beneficiary designations before the 25% excise tax under §4974 begins biting closes on December 31, 2024.
The headline is what most practitioners expected: non-eligible designated beneficiaries who inherit from a participant who had begun required minimum distributions must take annual RMDs during the 10-year window, not just empty the account by year ten. ² What is more consequential, and is materially under-discussed in the financial press, is how the final rules treat trusts named as IRA beneficiaries.
What follows is what we are telling family-office clients in the closing weeks of 2024, and what changes for everyone on January 1, 2025.
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