How should estate plans and beneficiary designations be updated in response to the 2026 RMD rules?
Executive summary
Begin reviewing retirement account beneficiary designations now: the IRS finalized new inherited-IRA rules that generally impose a 10‑year payout requirement and, for many beneficiaries, annual RMDs inside that window — changes that reshape tax timing and estate strategy [1] [2]. The IRS also delayed the effective date of certain proposed RMD regulation changes until the 2026 distribution year, giving account holders and sponsors implementation time but creating a transitional planning window [3] [4].
1. What changed — the 10‑year rule and annual RMDs for many beneficiaries
The Treasury and IRS finalized regulations that replace the old “stretch” IRA for most non‑spouse beneficiaries: inherited IRAs generally must be emptied within 10 years, and in many cases the final rules require annual RMDs during that decade rather than only a lump‑sum at year 10 — a material tightening that accelerates taxable income for beneficiaries [1] [2].
2. Who is most affected — non‑spouse and “non‑eligible” beneficiaries
The new rules split beneficiaries into categories; non‑spouse, non‑eligible designated beneficiaries face the 10‑year rule and, unless a specific exception applies, annual withdrawals may be required. Spouses retain special options — including treating an inherited IRA as their own and deferring distributions until their own RMD age — so spouse planning remains distinct from planning for children, nieces/nephews, and trust beneficiaries [5] [2].
3. The 2026 timing wrinkle — a brief implementation runway
The IRS issued an Announcement extending the anticipated effective date for certain proposed RMD regulations to January 1, 2026, and reiterated that final regulations will not apply earlier than the 2026 distribution calendar year. That delay gives sponsors, recordkeepers, and individual owners more time to adapt but also creates ambiguity for people who inherited accounts under the 2019–2022 SECURE changes [3] [4].
4. Practical estate‑planning moves to consider now
Given the tax acceleration, advisers in the coverage recommend: review and update beneficiary designations on IRAs, 401(k)s and life‑insurance policies to make them align with your will and trusts; consider whether naming a trust (carefully drafted to meet “see‑through”/separate‑share rules) or a charitable remainder trust remains appropriate; and discuss pre‑death Roth conversions or partial distributions to shift taxable assets before the 10‑year clock applies to heirs [2] [6]. Financial professionals quoted urge beneficiaries and account owners to consult advisors to avoid pushing heirs into higher tax brackets [6] [7].
5. Trusts and drafting details matter — don’t assume “trust = protection”
Trusts named as beneficiaries can help control distributions, but to preserve favorable post‑death RMD treatment they must meet strict drafting requirements (for example, immediate division into separate shares for multiple beneficiaries). Properly drafted “see‑through” or split‑trust language can allow each beneficiary to apply its own RMD rule; sloppy drafting can convert an account into a non‑designated beneficiary and force less favorable treatment [8] [1].
6. Recordkeeping, custodian rules and practical next steps
Beneficiary designations on account records override wills; custodians and plan documents may impose different options and forms and some employer plans have plan‑level rules that affect whether an inherited 401(k) can remain in‑plan. Update designations via custodian forms or online portals, confirm contingent beneficiaries, and coordinate changes across all accounts because updating one account does not update others [9] [10] [11].
7. Competing viewpoints and the limits of current guidance
Regulatory guidance has evolved: some commentators interpreted SECURE to allow no annual RMDs until year 10, while Treasury’s final regs and subsequent guidance require annual distributions in many scenarios; others stress that the 2026 applicability delay provides room for administrative smoothing [12] [4]. Available sources do not mention specific legislative fixes or tax‑rate changes after 2025; any projection about future tax rates or Congress’s action is therefore not covered in current reporting (not found in current reporting).
8. Action checklist for account owners and executors
Start by inventorying all retirement accounts and listed beneficiaries, confirming custodian‑level forms and plan rules, discussing Roth conversions or partial distributions with a tax pro if accelerating income makes sense, consulting your estate attorney if you intend to name a trust (to meet see‑through and separate‑share drafting requirements), and re‑testing beneficiary language after any major life event — each of these steps is recommended by estate and fiduciary advisers responding to the new regs [2] [8] [10].
Limitations: this summary relies on the IRS final regs and industry commentary collected here; it does not substitute for account‑level review or legal advice and available sources do not mention specific individualized tax outcomes or pending Congressional action beyond the 2026 implementation delay [4] (not found in current reporting).