Inherited IRAs: Understanding the 10-Year Rule and RMD Requirements

Written By AUSTIN FARMER

Inheriting an IRA can be a meaningful financial opportunity, but it also comes with specific IRS rules that are easy to misunderstand. Changes made by the SECURE Act have altered how inherited IRAs must be distributed, particularly around required minimum distributions (RMDs) and the 10-year rule. Below is a straightforward overview of what most beneficiaries need to know.

 

What Is an Inherited IRA?

An inherited IRA is an IRA passed to a beneficiary after the original account owner’s death. With limited exceptions (primarily for surviving spouses), beneficiaries cannot treat the account as their own. Instead, the account must remain titled as an inherited IRA and follow IRS distribution rules that depend on the beneficiary’s status and whether the original owner had begun taking RMDs.

 

The 10-Year Rule

For most non-spouse beneficiaries, if the original IRA owner died after December 31, 2019, the inherited IRA must be fully distributed by December 31 of the year marking the 10th anniversary of the owner’s death.

This rule applies to both traditional IRAs and Roth IRAs. While Roth IRAs differ from traditional IRAs in tax treatment, the required distribution timeline is generally the same.

 

Exceptions to the 10-Year Rule

Certain beneficiaries, referred to by the IRS as eligible designated beneficiaries, are not automatically subject to the 10-year rule. This group includes surviving spouses, minor children of the decedent (until reaching adulthood), beneficiaries who are disabled or chronically ill under IRS definitions, and beneficiaries who are not more than ten years younger than the original owner.

These beneficiaries may be permitted to take distributions based on life expectancy rather than being required to empty the account within ten years.

 

Required Minimum Distributions During the 10-Year Period

Whether annual RMDs are required depends on whether the original owner had already begun taking RMDs.

If the original owner had already started RMDs, most non-spouse beneficiaries must continue taking annual RMDs during the 10-year period and still ensure the account is fully distributed by the end of year ten.

If the original owner had not yet started RMDs, most non-spouse beneficiaries are not required to take annual distributions during the 10-year period, as long as the account is completely emptied by the end of year ten.

 

Deadline for the First RMD

When annual RMDs are required, the first inherited IRA RMD must generally be taken by December 31 of the year following the year of the original owner’s death.

For example, if the IRA owner passed away in 2025 and annual RMDs apply, the beneficiary’s first RMD would generally be due by December 31, 2026. Missing this deadline can result in IRS penalties, making it important to confirm whether an annual RMD requirement applies.

 

Inherited Roth IRAs

Inherited Roth IRAs are also subject to the 10-year rule, but they differ in two important ways. First, Roth IRAs are not subject to RMDs during the original owner’s lifetime. Second, qualified distributions from an inherited Roth IRA are generally tax-free if the five-year holding requirement has been met.

As a result, many Roth IRA beneficiaries will not have annual RMDs during the 10-year period, but the account must still be fully distributed by the end of year ten.

 

The Importance of Coordinating With a CPA

Distributions from inherited IRAs can have meaningful tax consequences, particularly for traditional IRAs where withdrawals are generally taxable as ordinary income. The timing of distributions, interaction with other income, and potential impact on tax brackets can vary significantly from one beneficiary to another.

Because of this, beneficiaries are often best served by coordinating distribution decisions with a qualified CPA or tax professional. A CPA can help evaluate the tax implications of different withdrawal strategies and ensure distributions are reported correctly, while financial planning guidance can help align those decisions with broader financial goals.

 

IRS Resources

 

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Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should consult with their qualified legal, tax, and accounting advisors before implementing any strategy discussed herein.




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AUSTIN FARMER
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