The rules for an inherited IRA turn on one question before any other: who are you to the person who died? A surviving spouse has options no one else gets. Most other individual beneficiaries have 10 years to empty the account. Estates, charities, and non-qualifying trusts follow a different track altogether. The SECURE Act of 2019 ended the old stretch strategy for most non-spouse beneficiaries, and SECURE 2.0 reset the penalty for missed distributions and the age at which the original owner had to start taking them. Missing an annual required minimum distribution now costs 25% of what you should have withdrawn.
Who Counts as What Kind of Beneficiary
The IRS puts inherited IRA beneficiaries into four buckets, and the bucket sets your timeline.1Internal Revenue Service. Retirement Topics – Beneficiary
- Surviving spouse. The most flexibility, including the option to treat the account as their own.
- Eligible designated beneficiary (EDB). A narrow group that can still stretch distributions over their own life expectancy: the surviving spouse, a minor child of the deceased owner, someone disabled or chronically ill, and anyone not more than 10 years younger than the deceased owner.
- Non-spouse designated beneficiary. Any individual named on the account who doesn’t fit the EDB definition. Most adult children, siblings, and friends land here, and they face the 10-year rule.
- Non-designated beneficiary. Entities such as estates, charities, and trusts that don’t qualify for look-through treatment.
The minor-child category is narrower than most people assume. It applies only to the account owner’s own children, not grandchildren or other minors, and the stretch treatment ends at age 21, when the 10-year clock takes over.
What a Surviving Spouse Can Do
Federal law exempts surviving spouses from the inherited-IRA rollover prohibition that binds everyone else.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts That opens two paths.
Roll It Into Your Own IRA
Move the assets into your own existing or new IRA and the account is treated as if it had always been yours. You don’t have to take RMDs until you reach your own required beginning date, which is age 73 if you were born between 1951 and 1959, or age 75 if you were born in 1960 or later.3Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners The account keeps growing tax-deferred, and you gain the ability to convert some of the balance to a Roth over time.
The tradeoff is early access. Once the money is in your own IRA, withdrawals before age 59½ trigger the standard 10% early withdrawal penalty. If you’re under 59½ and might need the funds, don’t rush the rollover.
Keep It as an Inherited IRA
Leave the assets in an inherited IRA titled in your deceased spouse’s name, with you listed as beneficiary. Distributions from an inherited IRA are never subject to the 10% early withdrawal penalty, whatever your age. RMDs are based on your own life expectancy, and you can wait to start them until the year your spouse would have reached their RBD age. You aren’t locked in: switching to a spousal rollover later remains open if your situation changes.
The 10-Year Rule for Non-Spouse Beneficiaries
If the original owner died in 2020 or later and you’re not an EDB, the account must be fully distributed by December 31 of the tenth year after the owner’s death. How you handle the years in between depends on whether the owner had reached their required beginning date.
Owner Died Before Their RBD
You have complete flexibility for years one through nine. Take as much or as little as you want in any given year, as long as the balance hits zero by the end of year ten. Many beneficiaries stagger withdrawals to match years when their other income runs lower, keeping the marginal tax rate on each distribution down.
Owner Died On or After Their RBD
Annual RMDs are required in years one through nine, calculated from the IRS Single Life Expectancy Table using your age. The remaining balance still has to be out by the end of year ten.4Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions You can always take more than the minimum, but skipping a required year now carries a penalty.
The IRS waived enforcement of these annual RMDs from 2021 through 2024 while it finalized the regulations. That grace period ended. Starting in 2025, a missed annual RMD when the owner died after their RBD triggers the excise tax.
Life Expectancy Distributions for EDBs
Eligible designated beneficiaries can stretch annual distributions over their own life expectancy, which usually produces much smaller required withdrawals and a longer runway for tax-deferred growth. Payments must begin by December 31 of the year after the owner’s death, with each year’s amount recalculated using your age and the IRS Single Life Expectancy Table.
An EDB can also elect the 10-year rule if the tax math works out better that way. Once you’re on the life expectancy method, though, that’s the path.
A minor child of the deceased owner uses the life expectancy method only until age 21. At that point the 10-year rule takes over and the remaining balance must be distributed within the following decade. If the child was taking life expectancy payments and the original owner died before their RBD, those annual payments continue in years one through nine of the post-21 window, with the balance out by the end of year ten.
When an Estate, Charity, or Trust Inherits
The 10-year rule governs individual beneficiaries. Non-individual beneficiaries follow the pre-2020 rules, which are tighter in most cases.
If the account owner died before their RBD and the beneficiary is an estate or charity, the account must be emptied by December 31 of the fifth year after death. No distributions are required before then, but the balance must reach zero by that deadline. If the owner died on or after their RBD, distributions continue based on the deceased owner’s remaining life expectancy.
A trust can qualify for look-through treatment if it meets a set of IRS requirements, including validity under state law, becoming irrevocable at death, having identifiable individual beneficiaries, and delivering documentation to the IRA custodian by October 31 of the year after death. When a trust qualifies, the distribution rules follow the status of the individuals behind it. When it doesn’t, the trust is treated like an estate. Trusts drafted before 2020 to stretch distributions across a beneficiary’s lifetime often now compress everything into 10 years, and the money can end up trapped inside the trust at compressed trust tax brackets. If you’re inheriting through a trust, the trust language should be reviewed against the current rules.
How Withdrawals Are Taxed
Traditional IRAs
Every dollar you withdraw from an inherited traditional IRA is ordinary income in the year you receive it. For a beneficiary on the 10-year rule, that creates a real planning problem. A $500,000 balance drained in equal installments adds $50,000 of income each year for a decade, which can push you into a higher bracket and affect income-tested benefits.
A non-spouse beneficiary cannot convert an inherited traditional IRA to a Roth. That option belongs only to a surviving spouse who first rolls the account into their own IRA. Your main lever as a non-spouse beneficiary is timing: pull more in lower-income years, less in higher-income years, while meeting any required annual minimum and clearing the account by the deadline.
Roth IRAs
Withdrawals of contributions from an inherited Roth are always tax-free. Earnings are tax-free as long as the original owner’s Roth account was open for at least five tax years, measured from January 1 of the year of the first Roth contribution. If that five-year period hasn’t been met, earnings may be subject to income tax, but the 10% early withdrawal penalty never applies to any inherited account.
The distribution timelines still bind. A non-spouse beneficiary of a Roth still faces the 10-year rule, or the life expectancy method for EDBs. The difference is that forced Roth withdrawals generally don’t generate a tax bill, so timing matters less than it does for a traditional IRA.
Turning Down an Inheritance
You aren’t required to accept an inherited IRA. If the tax burden doesn’t fit your situation, or you’d prefer the assets pass to the next beneficiary in line, you can file a qualified disclaimer. It must be in writing, irrevocable, and delivered to the IRA custodian within nine months of the owner’s date of death.5eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer
Two conditions catch people out. You cannot have accepted any benefit from the account first; even a single distribution disqualifies you. And you cannot direct where the disclaimed assets go. They pass to whoever is next under the account’s beneficiary designation, as though you had never been named.
Penalties and Mistakes That Cost Money
The most expensive error is missing a required distribution. Under SECURE 2.0, the penalty is 25% of the shortfall, down from the old 50%. Correct the mistake within two years by withdrawing the missed amount and the penalty drops to 10%.6Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
A few other errors worth knowing about:
- Missing the year-ten deadline. The full balance must be out by December 31 of the tenth year after death. Not the anniversary of the death, not April 15 of the following year.
- Getting the RBD age wrong. It’s 73 for owners born between 1951 and 1959, and 75 for those born in 1960 or later. Whether the owner died before or after their RBD determines whether you owe annual RMDs during the 10-year window.
- Retitling the account. An inherited IRA must stay in the deceased owner’s name with you as beneficiary. If a non-spouse beneficiary puts the account in their own name, the IRS can treat the entire balance as a taxable distribution.
- Adding money. You cannot contribute to an inherited IRA. It’s distribution-only. Only a surviving spouse electing the rollover can merge the inherited assets into a personal IRA.
- Assuming the old stretch rules apply. If the owner died before 2020, pre-SECURE Act rules still govern and most designated beneficiaries can stretch over their own life expectancy. If the owner died in 2020 or later, most non-spouse beneficiaries are on the 10-year rule regardless of what earlier guidance may have said.