IRS issues final rules for inherited IRAs — but many are 'missing the boat' on taxes, pro says

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The IRS has finalized rules on required withdrawals for certain inherited individual retirement accounts and other plans. But heirs could owe more taxes later by only taking minimums now, experts say. In final regulations last week, the agency confirmed most nonspouse beneficiaries have 10 years after the original owner's death to deplete inherited retirement accounts. These heirs also must take yearly required minimum distributions, or RMDs, which had been a lingering question among tax professionals for years. Before the Secure Act of 2019, heirs could "stretch" retirement account withdrawals over their lifetime, which reduced yearly taxes. The shorter 10-year window can mean bigger tax bills in withdrawal years, particularly for high-income heirs. Regardless, heirs are "missing the boat" because they should consider withdrawing more from inherited accounts now while tax rates are lower, said IRA expert and certified public accountant Ed Slott. More from Personal Finance: Here's what a Kamala Harris administration could mean for your wallet Is the U.S. in a recession? Roughly 3 in 5 Americans think so Here's where Kamala Harris could stand on tax policy, experts say Pretax inherited account withdrawals incur regular income taxes. Without changes from Congress, dozens of individual tax provisions, including lower federal income tax brackets, are scheduled to sunset after 2025. That would revert rates to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. "Every year you don't use [the lower brackets] is a wasted opportunity," Slott said.