As part of 2017 Tax Act, beneficiaries of inherited IRA’s no longer could take required minimum distributions (RMDs) over their life expectancies. Instead except for spouses and disabled children, they must do so within 10 years. There was a question as to how beneficiaries were to go about removing the funds. Could they wait until the 10th year and remove it all or did they have to take it out periodically. The answer as always is, “it depends”.
If prior to death, the account holder was taking required minimum distributions, then the beneficiaries have to continue taking decedent’s RMDs and close the account in the 10th year. If decedent was taking no RMDs prior to death, then the beneficiary doesn’t have to remove funds until year 10. This means that the money can grow tax deferred creating a larger return over the 10 year period. Unless you have qualified Trust provisions, Trusts must take the funds out within 5 years. So, it is not necessarily good to name your revocable trust as a beneficiary on your IRA.