The Internal Revenue Service recently issued Notice 2024-35, waiving any excise tax for failure to take required minimum distributions for 2024 for certain legacy retirement accounts subject to the 10-year rule. in light of the delay in issuing final regulations under the Regulation of Every Community Pension Enhancement (SAFE) Act.
Recall that the proposed regulations surprised practitioners by stating that if the retirement account owner dies after the required start date and the beneficiary is subject to the 10-year rule, they must still receive RMDs from year 1 through year 9 based on life Theirs. life expectancy (or possibly the life expectancy of the oldest beneficiary of the trust if it is an accumulating trust that is the beneficiary). This 10-year rule change may also apply in situations where a designated beneficiary or qualified designated beneficiary who was receiving RMDs during their lifetime died in 2020-2023 (for example, an IRA owner died in 2013 pre-SECURE , leaving an IRA to a child who then dies in 2022 or an IRA owner dies in 2022 post-SECURE leaving an IRA to an EDB that begins to take over their lifetime and then dies in 2023 – both situations begin the new 10-year rule).
The notice states that final regulations will be issued and take effect on January 1, 2025. This notice follows similar IRS notices issued in previous years after proposed regulations were issued in 2022 for the same issue.
The notice does not say there are no RMDs; it simply says that the IRS is waiving any penalties for failure to obtain it. So if you are a trustee of a trust that is a beneficiary and the instrument tells you to take the RMD, you may want to take it, especially if there is a beneficiary whose distributions would be adversely affected by failure to take it. receive one (for example, a conduit trust or a qualified interest property trust). It may be prudent for beneficiaries to take distributions to distribute income for financial reasons, even if they can avoid penalties for failing to take one.
This notice does not apply to situations in which owners die before the required commencement date. This includes Roth IRAs that have no RBD while the owner is living, and therefore, the owners are always deemed to die before their RBD. In such cases, there are no RMDs for beneficiaries subject to the 10-year rule until the 10th year.