Navigating Beneficiary IRA RMD Rules: Critical Changes for 2025

SECURE Act fundamentals

Beneficiary IRA RMD rules established in 2025 by the SECURE Act have fundamentally transformed how Americans manage inherited retirement accounts. The regulations implemented earlier this year now require annual distributions for most beneficiaries subject to the 10-year rule, creating significant new planning considerations for financial professionals and their clients.

How will your clients be affected?

Understanding eligible designated beneficiaries

The SECURE Act eliminated lifetime “stretch” distributions for most beneficiaries, replacing this option with a 10-year drawdown period that can limit long-term tax-deferred growth opportunities. However, the SECURE Act also created a special category called Eligible Designated Beneficiaries (EDBs). These individuals receive more favorable distribution options and include:

• Surviving spouses.
• Children under age 21.
• Disabled or chronically ill individuals.
• Beneficiaries no more than 10 years younger than the account owner.

EDBs may take distributions over their life expectancy if the participant hadn’t started Required Minimum Distributions before death.

Beneficiary IRA RMD rules for non-EDBs

Non-EDBs face stricter requirements. For example, adult children who aren’t disabled or chronically ill must distribute the entire account within 10 years of the participant’s death.

If the original account owner had started Required Minimum Distributions before death, beneficiaries must:

• Continue annual RMD payments during years 1-9 following the death.
• Distribute the entire account balance by the end of the 10-year period.

Critical 2025 changes

Starting in 2025, many beneficiaries under the 10-year rule also face annual RMDs. RMD amounts will vary based on:

• Beneficiary’s age.
• Relationship to the deceased.
• Account value.

Note, the IRS waived the 25% excise tax for missed inherited IRA RMDs in 2024. However, the RMD requirement itself remains in effect.

Planning implications

Clients who missed RMDs from inherited IRAs since 2020 face significant catch-up requirements. They must take multiple years’ worth of RMDs in 2025 to avoid penalties.

To ensure your clients are prepared for these changes, review plan documents carefully. Some plans mandate shorter payout periods than regulations. Understanding these plan-specific distribution options can help your clients avoid costly mistakes.

For specific questions about how these changes affect plan sponsors and participants, please contact us at 800-745-9995.

Disclosures

Representatives of Ameritas do not provide tax or legal advice. Please refer clients to their tax advisor or attorney regarding their specific situation.