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SHE LEFT HER KIDS A $400,000 IRA. THE IRS WANTS EVERY DOLLAR OUT AND TAXED WITHIN 10 YEARS.

@gavintalkstaxes

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Why it worked

The video addresses a common financial concern with clear, concise on-screen text, making complex tax rules easily digestible for a broad audience.

Summary

This video explains the 10-year rule for inherited IRAs for deaths after 2019. It highlights that most adult children must withdraw the entire balance and pay taxes within 10 years of the original owner's death, with exceptions for spouses, minor children, or heirs close in age.

Structure

1Introduction to the 10-year IRA rule
2Explanation of the rule for adult children
3Consequences of missing withdrawals
4Exceptions to the rule

Call to action

Read the description to learn more.

On-screen text

SHE LEFT HER KIDS A $400,000 IRA. THE IRS WANTS EVERY DOLLAR OUT AND TAXED WITHIN 10 YEARS. She thought her kids could stretch the withdrawals over their whole lives, the way it used to work. For deaths after 2019, most adult children must empty an inherited IRA within 10 years. Every withdrawal is taxed as income. • The 10-year clock starts the year after death • If the parent had already started RMDs, the kids must also take one every year • Miss a yearly RMD and the penalty is 25% of what wasn't taken The catch: a spouse, a minor child, or an heir within 10 years of your age can still stretch it. Read the description to learn more.

Original caption

She left her kids a $400,000 IRA. The IRS wants every dollar out and taxed within 10 years. She thought her kids could stretch the withdrawals over their whole lives, the way it used to work. For deaths after 2019, most adult children must empty an inherited IRA by December 31 of the 10th year after the death. Every withdrawal is taxed as ordinary income. If the kids wait and pull it all out in year 10, $400,000 or more lands on one tax return, often in their highest earning years. The rules: 1.⁠ ⁠The 10-year clock starts the year after death. 2.⁠ ⁠If the parent had already started RMDs, the kids must also take one every year in years 1 through 9. 3.⁠ ⁠Miss a yearly RMD, and the penalty is 25% of what wasn't taken (10% if fixed within 2 years). Who can still stretch it over their lifetime: a surviving spouse, the owner's own minor child (until age 21), a disabled or chronically ill heir, or an heir no more than 10 years younger than the owner. Ways to soften the tax bill: Heirs can spread withdrawals across all 10 years instead of waiting. Parents can convert part of the IRA to a Roth while alive, in lower bracket years. Heirs still follow the 10-year rule on a Roth, but withdrawals are tax-free. Charitable goals? Leave the IRA to charity and other assets to the kids. Source: IRS Publication 590-B, Distributions from Individual Retirement Arrangements Did you know about the 10-year rule? Yes or no. #inheritedira #ira #estateplanning #retirement #rmd #securesact #taxes #retirementplanning #inheritance #gavintalkstaxes