The rules for an inherited 403(b) depend almost entirely on who you were to the person who died. A surviving spouse can roll the account into their own retirement plan and treat it as their own. Most other individual beneficiaries must empty the account within 10 years of the owner’s death under the SECURE Act. A narrower group, called eligible designated beneficiaries, can still spread withdrawals over their own life expectancy. Estates, most trusts, and charities face compressed timelines of their own. Distributions from a traditional 403(b) are taxed as ordinary income, but the 10% early-withdrawal penalty does not apply, regardless of your age.
Figure Out Which Beneficiary Category You Are
Federal law sorts every beneficiary into one of three groups, and the group decides your timeline.
You are an eligible designated beneficiary (EDB) if you are the surviving spouse, a minor child of the deceased owner, disabled, chronically ill, or no more than 10 years younger than the deceased participant.1eCFR. 26 CFR 1.401(a)(9)-4 – Determination of the Designated Beneficiary EDBs can still stretch distributions over their own life expectancy.
You are a regular designated beneficiary if you are an individual named on the account but do not fit any EDB category. Adult children, siblings, friends, and partners more than 10 years younger than the deceased owner all sit here. The 10-year rule applies.2Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
You are a non-designated beneficiary if no individual was named, or if the beneficiary is an estate, a charity, or a trust that does not qualify as a see-through trust. This group has the least flexible timelines because the SECURE Act’s 10-year rule only changed the treatment of individual beneficiaries.3Internal Revenue Service. Retirement Topics – Beneficiary
A trust can be treated as a see-through trust and pass its underlying beneficiaries’ status through to the IRS if it meets four requirements: valid under state law, irrevocable (or becoming irrevocable at the owner’s death), all beneficiaries identifiable, and specific documentation provided to the plan administrator.4Internal Revenue Service. Internal Revenue Bulletin 2024-33 A trust that fails any of these tests is treated as a non-designated beneficiary.
If You Are the Surviving Spouse
Spouses have the widest set of choices, and the choice matters.
The most common route is a rollover into your own IRA, 401(k), or 403(b). Once rolled over, the account is treated as if it had always been yours. Required minimum distributions (RMDs) don’t start until your own required beginning date, which is age 73 for most people in 2026.5Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) People born in 1960 or later don’t need to begin RMDs until age 75.6Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners You also name your own beneficiaries on the new account.
You can instead keep the funds in an inherited account. RMDs are then based on your own life expectancy, or you can delay distributions until the year the deceased owner would have reached their required beginning date. This is worth considering if you are under 59½ and need access without any risk of a 10% penalty on withdrawals from your own IRA.
A lump-sum withdrawal is also available. The entire pre-tax balance lands on your tax return as ordinary income for that year, which usually pushes you into a much higher federal bracket. A partial rollover splits the difference: move some into your own retirement account and take the rest as a taxable distribution.
The 10-Year Rule for Non-Spouse Beneficiaries
If you are a designated beneficiary who is not an EDB, the inherited 403(b) must be empty by December 31 of the year containing the tenth anniversary of the owner’s death.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs How you pace withdrawals inside that decade depends on when the original owner died relative to their required beginning date.
Owner Died Before Their Required Beginning Date
You have full flexibility. No annual minimums are required in years one through nine. Withdraw whenever suits you, though bunching everything into year 10 usually creates a painful tax bill.
Owner Died On or After Their Required Beginning Date
The rules tighten. IRS final regulations issued in July 2024, effective for distribution years beginning January 1, 2025, confirm that you must take annual RMDs in years one through nine, with the full remaining balance due by the end of year 10.8Federal Register. Required Minimum Distributions Those annual amounts use your own single life expectancy. Missing a year-one-through-nine distribution triggers the standard penalty for insufficient RMDs.
Any RMD the owner was supposed to take in the year of death but did not take must still be distributed for that year. That falls on the beneficiary or the estate.
The Life-Expectancy Exception for Eligible Designated Beneficiaries
EDBs who are not the surviving spouse can still stretch distributions over their own life expectancy. This is the closest thing to the old stretch strategy that the SECURE Act eliminated for other individual beneficiaries.
A minor child of the deceased owner qualifies only until reaching the age of majority, which federal regulations define as the child’s 21st birthday.1eCFR. 26 CFR 1.401(a)(9)-4 – Determination of the Designated Beneficiary Once the child turns 21, the 10-year clock starts and the remaining balance must be distributed within those 10 years. Only the owner’s own children qualify. Grandchildren, nieces, nephews, and stepchildren who were not legally adopted do not.
Disabled and chronically ill beneficiaries must document their status as of the date of the owner’s death with the plan administrator. Meeting the IRS definition is not automatic and the documentation is strict.
A beneficiary not more than 10 years younger than the deceased qualifies based on dates of birth alone. This most commonly covers siblings or close-in-age partners.
If the Beneficiary Is an Estate, Charity, or Non-Qualifying Trust
Non-designated beneficiaries face shorter windows, and the 10-year rule does not help them.3Internal Revenue Service. Retirement Topics – Beneficiary
- Owner died before their required beginning date: The account must be emptied by December 31 of the fifth year after the year of death. No annual minimums are required inside that window, but the balance must reach zero by the deadline.
- Owner died on or after their required beginning date: Distributions are taken annually based on the deceased owner’s remaining life expectancy, with the prior year’s divisor reduced by one each year, until the account is depleted.
Non-designated beneficiaries cannot use their own life expectancy. If the owner never named a beneficiary and the account passes through the estate, this compressed schedule applies no matter who ultimately receives the money.
Inherited Roth 403(b) Accounts
A Roth 403(b) was funded with after-tax dollars, so the tax side is friendlier. Contributions come out tax-free at any time. Earnings come out tax-free if the account has been open for at least five taxable years, counted from the year the deceased owner first made a designated Roth contribution to the plan.9Office of the Law Revision Counsel. 26 USC 402A – Optional Treatment of Elective Deferrals as Roth Contributions If that five-year test isn’t met when the distribution happens, the earnings portion is taxable as ordinary income.
The distribution timeline rules are the same as for a traditional 403(b). A non-spouse designated beneficiary still has 10 years. An EDB can still use life expectancy.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs What changes is that qualified withdrawals are tax-free, so the strategic urgency around timing is lower.
Note one boundary: Roth 403(b) accounts are no longer subject to RMDs during the original owner’s lifetime under SECURE 2.0. That relief does not carry over to beneficiaries. Once the owner dies, beneficiary distribution rules apply whether the account is Roth or traditional.
How the Money Gets Taxed
Distributions from an inherited traditional 403(b) are ordinary income in the year received. The plan administrator reports each distribution on IRS Form 1099-R.10Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
No 10% Early-Withdrawal Penalty
Distributions from an inherited 403(b) are exempt from the 10% additional tax that normally applies to withdrawals before age 59½, regardless of the beneficiary’s age.11Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Younger beneficiaries who need immediate access benefit the most.
Federal Withholding
If you take a distribution as a check made out to you rather than doing a direct rollover or trustee-to-trustee transfer, the plan must withhold 20% of the taxable amount for federal income taxes.12Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions That 20% is a prepayment, not your final tax bill. A check payable to the receiving plan or IRA custodian, not to you personally, avoids the mandatory withholding.
Once the assets are inside an inherited IRA, later distributions are treated as nonperiodic payments and carry a lower default withholding rate of 10%, which you can adjust using IRS Form W-4R.13Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
State Income Tax
Most states tax retirement plan distributions as ordinary income. Rates range from zero in states with no income tax up to over 13% in the highest-bracket states. Some states offer partial exemptions for retirement income, particularly for older beneficiaries. On a lump sum, combined federal and state tax can easily exceed 40% of the withdrawal.
Spread the Withdrawals
Beneficiaries under the 10-year rule usually come out ahead spreading withdrawals across the decade instead of waiting until year 10. Bunching the full balance into a single tax year drives you into the highest marginal brackets. Even modest annual distributions can hold your taxable income in a lower bracket each year, potentially saving tens of thousands of dollars on a large account.
Disclaiming the Account
You can refuse the inheritance through a qualified disclaimer. It must be in writing, signed, and delivered to the plan administrator within nine months of the owner’s death.14eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer You also cannot have accepted any benefit from the account before disclaiming; even directing a partial distribution disqualifies it.
Once validly disclaimed, the assets pass as though you never existed as a beneficiary, typically to the next contingent beneficiary named on the account, or to the estate if none was named. You have no say in where they go. Disclaiming can make sense when a well-off surviving spouse would prefer the account to pass to children, or when a high-income beneficiary would face steep taxes that a lower-income contingent beneficiary could avoid. The nine-month deadline is firm.
The Steps and Deadlines That Come First
Notify the plan administrator and submit a certified copy of the death certificate. That establishes the date of death, which anchors every distribution deadline that follows.
Complete the plan’s beneficiary claim form and specify your chosen distribution method. If you are a non-spouse beneficiary electing a transfer, the funds must move into an inherited IRA titled in a format showing both the deceased owner’s name and yours, for example, “John Doe, Deceased, for Benefit of Jane Smith, Beneficiary.” That titling preserves the tax-deferred status and signals to the IRS that the inherited account rules apply.
If the deceased owner was already required to take an RMD for the year they died and had not yet taken it, that shortfall must still be distributed before the end of that calendar year. That falls on you or the estate, and failing to take it triggers the standard penalty.
Ask the plan for its Summary Plan Description early. Individual 403(b) plans sometimes impose their own procedural requirements on top of federal law, such as notarized signatures or a narrower menu of distribution options. File IRS Form W-4R to set your withholding preferences instead of accepting the defaults. Getting the paperwork right the first time keeps a processing delay from turning into a missed distribution deadline.