Can a Minor Inherit an IRA? Custodians, Payouts, and Taxes

A minor can inherit an IRA, but the account can’t sit in the child’s name alone: an adult custodian or trustee has to manage it, and the IRS sets a distribution clock that depends on the child’s relationship to the person who died. If the child is the deceased owner’s own son or daughter, distributions can stretch across life expectancy until age 21, then run out over the following 10 years. Any other minor — a grandchild, niece, nephew — gets 10 years, full stop.

Why a Child Can’t Hold the Account Alone

A minor lacks the legal capacity to sign contracts, which means they cannot open or operate a brokerage account. If a beneficiary form names a child directly with nothing else in place, the IRA custodian will freeze the assets until a court appoints a guardian or conservator. That process runs months, costs legal fees, and creates ongoing court oversight.

Two structures avoid the courtroom.

UTMA or UGMA Custodial Account

The simpler route is naming an adult custodian under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act on the IRA beneficiary designation itself. The custodian handles investment decisions and distribution requests on the child’s behalf. Most IRA custodians have standard paperwork for this.

The trade-off is control. When the child reaches the state’s termination age — commonly 21, but 18 in some states and up to 25 in others where the donor can specify — the custodian must hand the account over outright.¹

Trust as Beneficiary

Naming a trust as the IRA beneficiary lets the original owner set specific terms: a fixed percentage each year, distributions limited to education and health expenses, or full control delayed until 30 or 35. The extra legal cost tends to make sense for larger inheritances.

For the trust to preserve the favorable distribution rules, it needs to qualify as a “see-through” trust. That means it must be valid under state law, become irrevocable at the owner’s death, have identifiable individual beneficiaries, and get a copy of the trust document to the IRA custodian by October 31 of the year following the owner’s death.² If it doesn’t qualify, the IRS may treat the IRA as having no designated beneficiary, and the payout window shortens sharply.

How Fast the Account Must Be Emptied

The SECURE Act of 2019 forces most non-spouse beneficiaries to drain an inherited IRA within 10 years. It carved out an exception for “eligible designated beneficiaries,” which includes the deceased owner’s own minor child.³ That single distinction controls the timeline.

If the Child Is the Owner’s Own Son or Daughter

For IRS purposes, a “minor child” is anyone under 21, regardless of the state’s age of majority. While the child is under 21, annual required minimum distributions are calculated using the Single Life Expectancy Table in Appendix B of Publication 590-B. The custodian divides the prior year-end balance by the child’s life expectancy factor, which decreases by one each year.²

Because life expectancies are long, the required amounts are small. A 10-year-old beneficiary has a life expectancy factor around 73, so the first RMD works out to roughly 1.4% of the balance. Most of the money keeps compounding, which is the point.

Once the child turns 21, life-expectancy treatment ends and the 10-year rule takes over. The entire remaining balance must come out by December 31 of the year containing the 10th anniversary of the 21st birthday.² That gives the young adult until roughly age 31 to finish emptying the account.

One wrinkle: if the original owner had already reached their required beginning date and was taking their own RMDs, the beneficiary must continue annual distributions during the 10-year window, not just clear the account by the deadline. The IRS confirmed this in proposed regulations expected to apply for 2025 and later.⁴ If the owner died before their required beginning date, only the year-10 deadline matters and timing in between is flexible.

If the Child Is Anyone Else’s Minor

Grandchildren, nieces, nephews, and any minor who is not the deceased’s own child fall under the standard 10-year rule right away. No life expectancy stretch. No age-21 trigger. The account must be emptied within 10 years of the owner’s death.³

The same annual-RMD requirement applies here when the owner had already started their own RMDs: the adult managing the account has to take distributions each year during the 10-year window rather than saving everything for the final year.

Taxes on What Comes Out

Every dollar from a traditional inherited IRA is ordinary income to the child. And a child’s unearned income runs into the kiddie tax, a set of rules designed to stop families from shifting investment income to kids in lower brackets.

For 2026, a child’s unearned income above $2,700 is taxed at the parent’s marginal rate.⁵ The kiddie tax reaches children under 18, 18-year-olds who don’t provide more than half their own support, and full-time students under 24.⁶ If the parent sits in the 32% or 37% bracket, even a modest RMD can produce a real tax bill.

Roth inherited IRAs work differently. Distributions of contributions and earnings are generally tax-free as long as the original Roth had been open at least five years before the owner died.³ The distribution timeline still applies — life expectancy until 21 and then 10 years for the owner’s own child, or a flat 10 years for other minors — but the withdrawals don’t produce taxable income. If the five-year clock hasn’t run, earnings can be taxable while withdrawals of the original contributions remain tax-free.

What Happens If an RMD Is Missed

The IRS charges a 25% excise tax on any required amount that should have come out and didn’t.⁷ Fix the shortfall within a two-year correction window and file an amended return, and the penalty drops to 10%.⁸

The penalty applies regardless of the beneficiary’s age. A 12-year-old isn’t tracking IRS deadlines, so the adult managing the account has to. Most IRA custodians will calculate the annual RMD, but actually requesting the distribution and reporting it correctly at tax time falls on the custodian or trustee.

When the Child Becomes an Adult

Two transitions happen around the same age, on different schedules, and mixing them up creates problems.

Account control comes first. A UTMA or UGMA custodian must transfer the account outright when the beneficiary reaches the state-designated termination age. That is 18 in some states, 21 in most, and up to 25 where the donor could specify. Some brokerage firms send notices as that date approaches; not all do.¹

The IRS distribution rule follows its own clock. For inherited IRA purposes the child remains a “minor” until 21, and that is when the 10-year payout begins, whatever the state says about UTMA termination. A child in an 18-state gains control three years before the distribution rules shift. A child in a 25-state may have the 10-year clock already running before the custodian steps aside.

A trust follows its own document. A well-drafted trust can hold assets past 21 and release them on a schedule that lines up with the 10-year payout window. Once the beneficiary is an adult, meeting the remaining deadlines and paying the tax on withdrawals becomes their own responsibility, and the 25% penalty for a missed distribution lands on them directly.

1
FINRA. 2019 Report on Examination Findings and Observations – UTMA and UGMA
2
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
3
Internal Revenue Service. Retirement Topics – Beneficiary
4
Internal Revenue Service. Notice 2024-35, Certain Required Minimum Distributions for 2024
5
Internal Revenue Service. Rev. Proc. 2025-32
6
Internal Revenue Service. 2025 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income
7
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
8
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs