The rules for taking required minimum distributions from an inherited IRA depend on two things: your relationship to the person who died and whether that person had already reached their required beginning date for RMDs. Most non-spouse beneficiaries must empty the account within 10 years, and a subset of them must also take annual withdrawals during that window. A smaller group, called eligible designated beneficiaries, can still stretch distributions across their own life expectancy. Getting the classification right is the first step, because everything downstream flows from it.
Which Beneficiary Category You Fall Into
The IRS sorts inherited IRA beneficiaries into three groups, and your group controls your timeline, whether you owe annual withdrawals, and how those withdrawals are calculated.1Internal Revenue Service. Retirement Topics – Beneficiary
Eligible designated beneficiaries (EDBs) are the only group that can still use the life expectancy method. You qualify as an EDB if you are the surviving spouse, a minor child of the deceased owner (biological or adopted, not a grandchild or stepchild) who has not yet reached age 21, a disabled individual, a chronically ill individual, or a person not more than 10 years younger than the deceased owner.
Designated beneficiaries (DBs) are individuals named on the account who don’t fit any EDB category. Most adult children, grandchildren, siblings, and friends land here. DBs must empty the account within 10 years.
Non-designated beneficiaries (NDBs) are entities rather than individuals: estates, certain charities, and trusts that don’t qualify as “see-through” trusts.
The 10-Year Rule and the RBD Split
If you’re a designated beneficiary, the full account balance must be distributed by December 31 of the year containing the tenth anniversary of the owner’s death.1Internal Revenue Service. Retirement Topics – Beneficiary Whether you also owe annual RMDs during years one through nine depends on whether the original owner had reached their required beginning date when they died.
The RBD is April 1 of the year after the owner turned 73. That threshold rises to 75 for individuals born in 1960 or later, starting in 2033.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Owner Died Before Their RBD
You have no obligation to take any distributions in years one through nine. Withdraw everything in year 10, take distributions in any amounts at any time, or anything in between. This flexibility lets you manage your tax bracket year to year, which matters a lot when the account is large.
Owner Died On or After Their RBD
Final IRS regulations require annual RMDs in years one through nine on top of emptying the account by the end of year 10.3Federal Register. Required Minimum Distributions Those annual amounts use your own life expectancy factor from the IRS Single Life Expectancy Table.
The IRS waived penalties for missed annual RMDs during 2021 through 2024 while the regulations were being finalized.4Internal Revenue Service. IRS Notice 2024-35 – Certain Required Minimum Distributions for 2024 The final regulations took effect for calendar years beginning January 1, 2025, so the grace period is over. If you’re in this category and have been skipping annual withdrawals, start taking them now or face the excise tax on any shortfall.
How to Calculate the Annual RMD
The basic formula: divide the inherited IRA’s fair market value as of December 31 of the prior year by your applicable life expectancy factor.5Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
Look up your age in the year after the owner’s death in the IRS Single Life Expectancy Table (Table I in Publication 590-B). That gives you your starting factor. Each year after, subtract one from that factor rather than looking up a new one. If your starting factor at age 50 is 36.2, your second-year factor is 35.2, your third-year factor is 34.2, and so on.
Every RMD is due by December 31 of that calendar year, including the first one. There is no April 1 grace period for inherited IRAs like there is for original owners taking their first RMD.
The Life Expectancy Method for Eligible Designated Beneficiaries
EDBs can spread distributions across their own single life expectancy, which can mean decades of continued tax-deferred (or tax-free, for Roth) growth. Your first distribution is due by December 31 of the year after the owner’s death. The calculation works the same way as above: divide the prior year-end balance by your life expectancy factor, and reduce that factor by one each subsequent year.5Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
A minor child of the deceased owner uses the life expectancy method until reaching age 21. At that point EDB status ends and the 10-year clock starts. The remaining balance must be fully distributed by December 31 of the year containing the tenth anniversary of the child turning 21. Only biological or adopted children of the deceased owner qualify; grandchildren, stepchildren, and other minors are designated beneficiaries subject to the standard 10-year rule regardless of age.
Surviving Spouse Options
Surviving spouses have more choices than any other beneficiary, and the right one can save thousands.1Internal Revenue Service. Retirement Topics – Beneficiary A surviving spouse can:
- Roll the inherited IRA into their own IRA. The account is treated as if it were always yours, RMDs don’t begin until you reach your own RBD, and you can name new beneficiaries.
- Keep it as an inherited IRA. You take life expectancy distributions from the account while it remains titled in the deceased owner’s name. You can delay the start of distributions until the later of December 31 of the year after the owner’s death or December 31 of the year the owner would have turned 73.
- Use the 10-year rule. Less common, but available.
The rollover looks like the obvious move, but it isn’t always. If you are younger than 59½, rolling the account into your own IRA means any withdrawals you take before reaching 59½ face the 10% early withdrawal penalty. Keeping the account as an inherited IRA avoids that penalty entirely, because distributions taken due to the death of the IRA owner are exempt from the 10% additional tax.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions A younger spouse who may need the money before 59½ should think twice before rolling over.
Inherited Roth IRAs
Roth IRAs follow the same beneficiary classification and timelines as traditional IRAs, with one large difference: qualified distributions come out tax-free.1Internal Revenue Service. Retirement Topics – Beneficiary Contributions are always tax-free on withdrawal, and earnings are tax-free as long as the Roth account has been open for at least five years, counting from when the original owner first funded any Roth IRA.
There is also a practical break for the 10-year rule. Because original Roth IRA owners are never required to take RMDs during their lifetime, they have no required beginning date. A Roth owner is always treated as having died before their RBD, whatever their age. Designated beneficiaries of an inherited Roth IRA are therefore not required to take annual distributions in years one through nine. You can let the account grow tax-free for a full decade and empty it in year 10.
The account still must be fully distributed by the 10-year deadline. Leaving money in past that point triggers the excise tax on the shortfall.
Rules for Non-Designated Beneficiaries and Trusts
When the beneficiary is an estate, a non-qualifying trust, or another entity rather than an identifiable individual, the rules depend on when the owner died relative to their RBD.
- Owner died before their RBD: the entire account must be emptied by December 31 of the fifth year after the year of the owner’s death. No annual distributions are required during those five years.7Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
- Owner died on or after their RBD: annual distributions are calculated using the deceased owner’s remaining single life expectancy, reduced by one each year. This “ghost life expectancy” method often produces a longer distribution window than the 5-year rule.
A trust can avoid NDB treatment by qualifying as a “see-through” trust. The IRS looks through the trust to the individual beneficiaries underneath and applies the distribution rules based on those individuals. To qualify, the trust must be valid under state law, become irrevocable no later than the owner’s death, have identifiable underlying beneficiaries, and provide a copy of the trust document to the IRA custodian by October 31 of the year following the owner’s death. When the trust qualifies, the distribution period is based on the oldest trust beneficiary: if that person is an EDB, the life expectancy method applies; if a DB, the 10-year rule applies.
Successor Beneficiaries
When an inherited IRA beneficiary dies before the account is fully distributed, the assets pass to a successor beneficiary. The successor does not get a fresh set of options. They step into the remaining timeline.
- If the original beneficiary was a designated beneficiary, the successor must empty the account by December 31 of the year containing the tenth anniversary of the original IRA owner’s death. The clock does not reset.
- If the original beneficiary was an eligible designated beneficiary, the successor generally must empty the account by December 31 of the year containing the tenth anniversary of the original beneficiary’s death. The successor gets a fresh 10-year period measured from when the EDB died.
A successor stepping into a DB’s timeline might have only a few years left. A successor inheriting from an EDB who died shortly after the original owner could have close to a full decade.
How Inherited IRA Distributions Are Taxed
Distributions from an inherited traditional IRA are taxed as ordinary income in the year you receive them.5Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs) The IRA custodian will withhold federal income tax unless you specifically elect out. For non-periodic distributions such as a lump sum, the default withholding rate is 10%.
That 10% often falls short of the actual tax owed, especially on larger distributions that push you into a higher bracket. Beneficiaries who inherit sizable traditional IRAs under the 10-year rule should plan carefully. Spreading withdrawals across multiple years to stay in lower brackets almost always saves money compared to taking everything in year 10. The difference between a 22% and a 37% marginal rate on a $500,000 inherited IRA is $75,000 in additional federal tax alone.
Distributions from an inherited IRA are exempt from the 10% early withdrawal penalty, regardless of the beneficiary’s age. The penalty exception for distributions after the death of the account owner applies to both traditional and Roth accounts.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions The exemption disappears if a surviving spouse rolls the inherited IRA into their own IRA and then takes a distribution before 59½.
Penalty for a Missed RMD
The excise tax for failing to take a required distribution is 25% of the shortfall, meaning the difference between what you should have withdrawn and what you actually took out.8Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans Before the SECURE 2.0 Act, that penalty was 50%.
The penalty drops to 10% if you correct the shortfall within the “correction window.” That window runs from the date the penalty is imposed until the earliest of: the IRS mails you a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the year you missed the RMD. In practical terms, if you missed an RMD for 2025, you generally have until December 31, 2027, to take the missed distribution, file an amended return reflecting the 10% rate, and pay the reduced penalty.
You report the penalty on Form 5329, filed with your individual tax return.9Internal Revenue Service. About Form 5329, Additional Taxes on Qualified Plans If the failure was due to reasonable error and you’ve since taken the full distribution, you can request that the IRS waive the penalty entirely. The instructions for Form 5329 describe the process.10Internal Revenue Service. Instructions for Form 5329
Account Titling
An inherited IRA must keep the deceased owner’s name in the account title, and the title must clearly indicate the account is inherited and identify you as the beneficiary. A typical format looks something like “Jane Doe, deceased, IRA for benefit of John Doe, beneficiary.” The exact format varies by custodian. If the account is retitled solely in your name without indicating it’s inherited, the IRS may treat the entire balance as a taxable distribution in that year. Confirm the titling with the custodian before any funds move.