Navigate the New RMD Rules with Confidence

In July 2024, the IRS released critical updates to required minimum distribution (RMD) regulations under the 2020 SECURE Act, as well as proposed regulations under the SECURE 2.0 Act of 2022. Effective starting in 2025, these updates clarify several areas of confusion, including trust beneficiaries, spousal rollover rules, and the 10-year payout rule for non-spouse beneficiaries.

Key RFG Rule Changes for Your Financial Planning

1. Annual RMDs During the 10-Year Rule Period: Clarity at Last

Beneficiaries must now take annual RMDs if the account holder passed after their Required Beginning Date (RBD). The previously waived RMDs for 2021–2024 will no longer apply starting in 2025.

Planning Tip: Beneficiaries subject to the 10-year rule should consider withdrawing more than the annual RMD to avoid a hefty tax bill in the 10th year when the account must be emptied. Focusing on “maximum” withdrawals rather than “minimum” can help minimize taxes.

2. Simplification for Eligible Designated Beneficiaries (EDBs)

The definition of EDBs is expanded, including new provisions for:

• Stepchildren, adopted children, and eligible foster children of the IRA owner.
• Individuals with disabilities under new safe harbor guidelines.
• Simplified documentation for beneficiaries with chronic illnesses or disabilities.

Planning Tip: These changes make it easier for more beneficiaries to qualify as EDBs and benefit from extended payout options.

3. Trusts as Beneficiaries: Loosened Requirements

New rules ease the burden of using trusts as beneficiaries:

• Trusts can now apply RMD rules separately for sub-trust beneficiaries if the trust is terminated and divided into sub-trusts upon the account owner’s death.
• Trustees no longer need to provide exhaustive documentation to satisfy “see-through” rules, simplifying administrative processes.

Planning Tip: While the SECURE Act reduced the appeal of trusts for RMD planning, these updates clear up confusion and provide new opportunities for trust beneficiaries.

More RFG Rule Changes for Your Financial Planning

4. Enhanced Flexibility for Spouse Beneficiaries

Surviving spouses can now delay RMDs until the deceased spouse would have reached RMD age. These distributions will be calculated using the Uniform Lifetime Table and the spouse’s age, resulting in smaller RMDs.

Planning Tip: This is a valuable option for surviving spouses, allowing them to delay distributions and reduce RMDs while still retaining the ability to roll over the account at any time.

5. Elimination of Confusing Requirements for Elderly Beneficiaries

The IRS has eliminated the need for elderly beneficiaries to simultaneously monitor their own shorter life expectancy alongside the deceased’s life expectancy.

Planning Tip: This welcome change removes unnecessary complexity, especially for older beneficiaries.

6. Hypothetical RMD Rule for Spouse Beneficiaries: Retained

Spousal rollover rules now ensure that “hypothetical RMDs” must be taken if the 10-year rule is elected. This ensures that RMDs cannot be avoided by using a combination of the 10-year rule and a spousal rollover.

Planning Tip: This reiterates the IRS’s commitment to enforcing RMDs. Be sure to plan carefully to remain compliant.

What’s Next with RMD Rule Changes?

These new rules bring both opportunities and challenges, particularly when it comes to optimizing tax strategies for inherited retirement accounts. To help you better understand these updates and how they apply to your situation, we’ve created a detailed guide: “New RMD Rules Are Here.”

Download this free guide below.

Suppose you’re a beneficiary of an inherited retirement account or navigating spousal or trust-related RMD rules. In that case, it’s essential to have a strategy to meet your financial goals while remaining compliant.

Financial Success Doesn’t Happen by Chance
RMD rules can be confusing, and mistakes can be costly. That’s why we’re here to help. If you have questions about how these new rules impact you or need assistance creating a personalized plan, don’t hesitate to reach out.

Virtual Consultation

Contact Chris Robinson, ChFC, at our office, 940-464-4104, or schedule a Virtual Consultation online at RFGWealthAdvisory.com/virtualconsultation/.

At RFG Wealth Advisory in Argyle, Texas, we take pride in being an independent, fee-only Registered Investment Advisor firm. Our client’s interests always come first, and we offer a transparent, simple fee structure that’s easy to understand.

Let’s work together to ensure you’re ready for these changes and positioned for financial success.

Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.