If one inherited a retirement account during the last several years, it’s likely they will have to take distributions and pay taxes on all that money within 10 years, according to new, finalized IRS rules.
Unless they are a surviving spouse, a minor child, a disabled or chronically ill person, or a person less than 10 years younger than the retirement account owner, they will have to empty the account within 10 years. In some cases, annual required minimum distributions, or RMDs, must also be taken.
Before the new rule, heirs could “stretch” individual retirement account (IRA) withdrawals over their lifetime, which reduced yearly taxes. The shorter 10-year window can mean bigger tax bills in withdrawal years, particularly for high-income beneficiaries.