Top 7 RMD Changes With the CARES Act

Top 7 RMD Changes With the CARES Act

With turning 72 (or 70 1/2 prior to December 31, 2019), you’re normally required to make annual distributions from your 401(k), IRA, or other tax-advantaged retirement accounts (excluding Roth IRAs). If you fail to take a required distribution, you’re taxed heavily (50%) on the amount you were required to withdraw. Thanks to the CARES Act, you are not required to take money out of your retirement accounts in 2020. The upside of not having to take your RMD this year for many investors is that you can leave your investments alone and not have to worry about liquidating or taking a piece of your investment in-kind to satisfy your RMD. There is also the advantage of not having to pay taxes on the funds taken for RMD purposes. Read on to learn about the top 7 changes to RMDs with the CARES Act.

CARES Act: Top 7 RMD Changes

1. 2020 RMDS Are Waived For IRA Owners & Beneficiary Accounts

The CARES Act has waived RMDs for defined contribution plans, governmental eligible deferred compensation plans, and individual retirement plans (which are IRA accounts and IRA annuities).

This includes accounts the individual owns personally and is a beneficiary of. RMDs have been waived for both of these cases with the CARES Act (Section 2203).

Please note: RMDs are not waived for defined benefit plans.

2. 2019 RMDs Waived Until April 1, 2020

For an individual whose first RMD year was 2019, they had the option of deferring their RMD until April 1, 2020. This waiver only applies if the first year’s (2019’s) RMD was not taken by December 31, 2019, and the individual intended on satisfying their first year requirement in 2020.

3. Distributions Can Be Rolled Back Into an IRA

RMDs are not typically eligible to be rolled over to another IRA. However, because RMDs are waived for 2020, distributions done this year can be rolled back into an IRA in order to avoid paying taxes on those funds as long as this is done within 60 days from receiving the funds. Additionally, a distribution that is properly rolled over is excluded from income reported for that year.

Please note: The one-per-year rule still applies (see number four).

4. The One-Per-Year Rollover Rule Still Applies

Taking a distribution from an IRA account and then rolling the funds into another IRA within the 60-day window (which is referred to as an indirect rollover) can still only be done once per calendar year. This does not apply to Roth conversions or rollovers where an employer-sponsored retirement plan, a 401(k) for example, is on the distribution or rollover end of the transaction).

5. The 60-Day Rollover Extension/Waiver


The 60-day rollover period can be extended if the 60-day deadline was missed due to a timing error by the financial institution or due to any of the reasons listed in Revenue Procedure 2016-47. If this happens, the rollover contribution may be made as soon as possible, but generally within 30 days of the missed deadline.

The deadline is generally postponed due to a federally declared disaster. This year, in response to COVID-19, the deadline for completing a rollover was extended to July 15, 2020 under IRS Notice 2020-23.


With the IRS Private Letter Ruling (PLR) request, the IRS may waive the 60-day rollover requirement. However, the IRS charges a hefty fee of $10,000 to review these waiver requests, with no guarantee of a favorable ruling. The IRS considers the circumstances of each case when making a decision. The IRS uses guidelines (available in IRS Revenue Procedure 2003-16).

These are just a few of the circumstances in which the 60-day deadline can be considered under the waiver.

6. RMDs Can’t Be Rolled Over From Beneficiary Accounts

Except for spousal beneficiaries, an individual may not roll over any portion of a distribution from an inherited retirement account.

Under the spouse-beneficiary provision, the rollover may not be made to a beneficiary (inherited) retirement account and must be made to the spouse’s own IRA (non-Beneficiary IRA).

7. The 5-Year Rule Becomes 6

The 5-year period is extended by one year if 2020 is part of those 5 years. See the table below.

Year the Account Owner Died Year the Account Must be Fully Distributed
2015 2021
2016 2022
2017 2023
2018 2024
2019 2025

For questions regarding how these RMD changes with the CARES Act affects you, contact your tax and/or financial advisor today. If you have questions about how this specifically affects your IRA account at Midland, you can reach us by calling (239) 333-1032 or by visiting

MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.

Options for Taking An RMD When Your Account is Illiquid

Options for Taking an RMD When Your Account Is Illiquid

2020 brings changes to the Required Minimum Distribution rules, such as anyone under 70.5 may now wait until they turn 72 to begin taking mandatory withdrawals from their pre-tax retirement plans. One thing that has not changed is the 50% penalty for not taking a timely RMD. As an IRA custodian that specializes in holding alternative investments, many of our clients hold illiquid assets. If you are a client that needs to take an RMD, but find yourself with insufficient cash in your account you still have options.

Plan Ahead

First, if you are new to self-directing your IRA, consider leaving sufficient cash reserves in your account when making an investment. Many alternative investments have related expenses that should be paid out of the undirected cash in your account, in addition to the administrative fees associated with managing your account.

If this is not an option then this next suggestion may be useful. Do you have another pre-tax retirement plan with cash or assets which can be easily liquidated? You are not required to draw your RMDs from each account that you hold; instead, you can take your entire RMD from another existing account that you hold.

Find An Alternate Route

If you do not have another plan to withdraw from then you may want to consider taking a non-cash, or In-Kind, distribution. For example, if your Midland account holds Real Estate, you can distribute a part of, or the entire title to, the property.

Here is a detailed example of this scenario:

Bob is required to withdraw $10,000 as an RMD. He holds real property in his IRA that is worth $50,000.00. Bob provides Midland with a certified appraisal to authenticate the property value and has a Quit Claim Deed prepared which will effectively change the title from sole ownership to tenants in common. The Quit Claim Deed will re-register 20% to Bob as an individual while the IRA retains 80% ownership of the property. Midland will report to the IRS on a 1099-R that Bob took a distribution in the amount of $10,000. Bob’s RMD will be satisfied.

Sell An Asset

Another option to consider is selling an asset. The proceeds from the sale will return to the IRA, tax-deferred, and only the amount withdrawn will become taxable.

Take the 50% Penalty

Finally, as a last option, an account holder may choose to not take the distribution. If an account holder opts out of taking an RMD the penalty is 50% of the amount not taken. Here is an example:

Susan is required to withdraw $3,000.00 as an RMD. The asset she is holding will be very costly to re-register, so she decides not to take an RMD. Susan will have to pay $1,500 to the IRS when she files her taxes for not taking her RMD. The asset will remain untouched in the IRA.

It’s Up To You

Ultimately, the way that assets are distributed is up to you. These are just a few examples of ways to distribute cash and assets from your account, but as always, you should consult with your CPA or tax advisor about your specific situation.

Midland offers an RMD Calculator to make this process easy for our clients. For questions or more information regarding RMDs, please contact Midland Trust at (239) 333-1032 or visit

Required Minimum Distributions from Non-Liquid Assets

Required Minimum Distributions From Non-Liquid Assets

What is a Required Minimum Distribution or an RMD?

At age 72 (unless it is a Roth IRA), people are required to start pulling money out of their IRA and pay taxes on the distribution. The IRS term for this is a Required Minimum Distribution or RMD. If they fail to take this RMD, which is based on the value of the account and the age of the IRA holder, there is a 50% penalty (of the RMD amount).  An RMD calculator is a good tool to bookmark to ensure compliance with all IRS regulations.  Over the years, there have been occasions when a client has been in a perplexing dilemma regarding liquidity of their IRA-owned asset and their IRA RMD. While RMD’s are based on the aggregate of all your IRAs, regardless of how many custodians you have, the RMD can be taken from any (or all) of the custodians. It does not need to come out proportionally from each custodian.

RMD’s in Liquid vs Non-Liquid Assets

In many cases, our clients have non-liquid assets in their accounts. They take their RMD from remaining cash and/or another, more liquid, IRA account. These are the easy cases. But what happens if a client has a non-liquid asset and no remaining cash or liquid assets to take the RMD? While it is not a situation you want to get into, there is a solution. You can take the non-liquid asset itself (or portion thereof) as a taxable distribution.

3 Possible Solutions for RMD’s in an IRA holding a Non-Liquid Asset

For example, let’s say I am 77 years old and I have an IRA worth $100,000 as of December 31st of 2010. My 2011 RMD is $4,716.98. However, I don’t have any cash left in my account. I only have a piece of real estate valued at $100,000. I have 3 options.

  1. Do nothing and pay penalties of $2,359. Most woud agree this is not ideal.
  2. Sell the asset and take the RMD from the cash. But is market suitable for sale?
  3. Take a percentage of the asset out of the IRA as a taxable distribution.

In this case, I opt for option three. I have an appraisal prepared and fill out my IRA administrator’s distribution form. I also have a deed prepared issuing 5% of the $100,000 property to myself. So now, rather than the IRA owning 100% of the property, the IRA owns 95% while I own 5% personally. The IRA administrator will report to the IRS (and client) that a distribution of $5,000 occurred. This is a taxable event, even though I did not receive any cash. I received $5,000 in value instead.

As mentioned, this is not a situation you want to get involved in if avoidable. There are expenses associated each time this is done (i.e. new appraisal annually and new deed preparation annually). The client could opt to remove the asset in a shorter time frame (i.e. 25% over 4 years). However, the taxable implications would potentially be higher if the distributions occur in a shorter time frame. It is best to talk to your financial advisor or CPA before deciding how much of a distribution is best for you. A little planning ahead can usually go a long way in keeping situations like this from arising. However, it is nice to know there is an option for those stuck in this dilemma.

We have a depth of knowledge and creative solutions for RMD’s as well as other issues that arise with self-directed IRAs. For more information, visit or contact us today.