The recent changes in the rules governing inherited retirement accounts have given heirs a significant advantage – more time to keep their money and plan their financial future wisely. This new development allows beneficiaries to stretch out the distributions over a longer period, potentially reducing the tax burden and providing more flexibility in managing inherited assets.

This decision by the Internal Revenue Service to delay enforcement of the law passed in 2019 brings a sigh of relief to many Americans who inherited retirement accounts since 2020. The change comes after numerous complaints and uncertainties surrounding the new rules. The postponement means that these inheritors won’t be required to start pulling money out this year.

Previously, most inheritors other than spouses were mandated to empty IRAs within 10 years under the new law, rather than over their lifetimes as was previously allowed. Heirs who inherited accounts before 2020 are still subject to the old rules, which means they generally must take annual withdrawals over their expected lifetimes.

Additionally, the penalty for not adhering to RMD requirements, which stands at a hefty 25% of the amount that should have been withdrawn, has been temporarily put on hold. This move by the IRS provides much-needed flexibility and time for individuals and organizations to navigate these regulations without fear of immediate financial repercussions.