Inherited IRA Rules Explained: The 10-Year Rule, Spouses and RMDs
Inheriting an IRA comes with a deadline most people never hear about until it is close. Here is how the SECURE Act's 10-year rule works, who qualifies for exceptions, what changes for spouses and Roth accounts, and the mistakes that trigger taxes and penalties.
Inheriting an IRA usually arrives at a hard moment, and the paperwork can feel like the least important thing in the world. But an inherited IRA comes with its own rules, and they are not the rules that applied to the person who left it to you. Get them right and the account can keep growing, with withdrawals timed to suit your tax situation. Get them wrong and you can face a large, avoidable tax bill or a penalty.
This guide explains how the rules work for deaths after 2019, when the SECURE Act changed them. It describes common scenarios, not what you personally should do. Inherited accounts are a place where a tax professional can earn their fee.
What changed with the SECURE Act
Before 2020, most beneficiaries could "stretch" an inherited IRA, taking small required withdrawals over their own life expectancy and leaving the rest to grow tax-deferred for decades. The SECURE Act, which applies to owners who died on or after January 1, 2020, ended the stretch for most people. Instead, most beneficiaries must empty the account by December 31 of the tenth year after the year the owner died.
If you inherited an account from someone who died before 2020, the older rules generally still apply to you. The rest of this article assumes a death in 2020 or later.
Three kinds of beneficiary
The IRS sorts beneficiaries into three groups, and almost everything depends on which one you are in.
Eligible designated beneficiaries
These people can still stretch withdrawals over their life expectancy, at least for a while:
- The owner's surviving spouse.
- The owner's minor child, until they turn 21. After that, the 10-year clock starts.
- A beneficiary who is disabled or chronically ill, as the tax rules define those terms.
- Anyone who is not more than 10 years younger than the owner, such as a sibling close in age.
Designated beneficiaries
Any other individual named on the beneficiary form, most often an adult child or grandchild. These beneficiaries are subject to the 10-year rule.
Non-designated beneficiaries
Entities that are not people, such as the owner's estate or a charity, plus some trusts that do not meet IRS requirements. If the owner died before their required beginning date, these beneficiaries generally must empty the account within five years. If the owner died on or after it, withdrawals can be spread over what would have been the owner's remaining life expectancy.
How the 10-year rule works
The deadline is simple: the account must be fully withdrawn by the end of the tenth calendar year after the year of death. The complication is whether you also owe withdrawals in the years before that.
The answer depends on the owner's required beginning date, the point at which they had to start their own required minimum distributions. That is generally April 1 of the year after they reached their RMD age.
- The owner died before their required beginning date. You can take money out in any pattern you like, including nothing for nine years, as long as the account is empty by the end of year ten.
- The owner died on or after their required beginning date. Under the IRS final regulations, you generally must take an annual RMD in years one through nine, based on your life expectancy, and empty the account by the end of year ten.
That second point surprised many beneficiaries. The IRS waived penalties for missed annual withdrawals of this kind for several years while it finalized the rules, but that relief has ended. Confirm with your custodian which schedule applies to your account.
| Your situation | Annual withdrawals? | Final deadline |
|---|---|---|
| Spouse who treats the IRA as their own | Under their own RMD rules | None beyond their own RMDs |
| Spouse who keeps it as an inherited IRA | Can generally delay until the owner would have reached RMD age | Life expectancy payouts |
| Minor child of the owner | Life expectancy payouts until 21 | 10 years after turning 21 |
| Disabled, chronically ill, or not more than 10 years younger | Life expectancy payouts | None while the exception applies |
| Other individual, owner died before required beginning date | Not required | End of year 10 |
| Other individual, owner died on or after required beginning date | Required in years 1 to 9 | End of year 10 |
| Estate or charity | Depends on the owner's age at death | 5 years, or owner's remaining life expectancy |
Options for a surviving spouse
Spouses get the most flexibility, and the choice is worth taking slowly.
- Treat the IRA as your own, or roll it into your own IRA. Distributions then follow your own RMD schedule, which can help a younger spouse delay withdrawals. The downside: before age 59½, withdrawals from your own IRA can trigger the 10% early withdrawal penalty.
- Keep it as an inherited IRA. Withdrawals are penalty-free at any age, which suits a younger spouse who may need the money. You can generally wait to start RMDs until the year your late spouse would have reached RMD age.
- Switch later. A spouse can keep the account as inherited while they are young and penalty-free access matters, then move it into their own IRA later.
Inherited Roth IRAs
A Roth IRA owner never has required withdrawals during their lifetime, so for these rules they are treated as having died before their required beginning date. Non-spouse beneficiaries subject to the 10-year rule therefore have no annual RMDs, but the account must still be emptied by the end of year ten.
Qualified withdrawals are tax-free. Many beneficiaries choose to leave the money growing until late in the ten-year window. A withdrawal can be taxable only if the original owner's first Roth contribution was less than five years before the withdrawal, and even then only on the earnings.
Taxes on inherited traditional IRAs
Every dollar you withdraw from an inherited traditional IRA is generally taxed as ordinary income in the year you take it. The 10% early withdrawal penalty does not apply to beneficiaries, whatever their age.
The 10-year rule turns the timing of withdrawals into a tax-planning decision:
- Spreading withdrawals evenly over ten years can keep you out of higher brackets.
- Lower-income years, such as a gap between jobs, a sabbatical or the years after you retire, are good years to take more.
- Waiting until year ten and taking everything at once can push a large account into the top brackets. It can also affect things tied to income, such as Medicare premiums or eligibility for some credits.
State income tax may also apply, depending on where you live.
Mistakes to avoid
- Asking for a check. A non-spouse beneficiary cannot do a 60-day rollover. If the custodian pays the money to you, it is a taxable distribution and cannot be undone. Use a direct trustee-to-trustee transfer.
- Getting the title wrong. The new account should be titled as an inherited IRA, naming both the deceased owner and you as beneficiary. The exact wording varies by custodian.
- Forgetting the year-of-death RMD. If the owner was taking RMDs and had not taken that year's amount before they died, the beneficiary generally has to take it.
- Missing a required withdrawal. The excise tax on a missed RMD is 25% of the shortfall. SECURE 2.0 reduces it to 10% if you correct it promptly, and the IRS can waive it for reasonable cause. Report it on Form 5329.
- Not naming your own beneficiaries. Fill in the beneficiary form on the inherited account so a successor can take over, generally inheriting what remains of your timetable.
A short checklist
- Get a copy of the beneficiary form and a death certificate, and contact the custodian.
- Find out which beneficiary category you fall into and whether the owner had reached their required beginning date.
- Open a properly titled inherited IRA and move the money by direct transfer.
- Take any year-of-death RMD the owner missed.
- Plan withdrawals across the ten years with your other income in mind. Our guide to how retirement income is taxed explains how the pieces fit together.
This article explains general rules and is not personal tax or investment advice. Rules and IRS guidance change; check IRS Publication 590-B and speak with a qualified professional about your situation.
Frequently asked questions
Do I have to take money out of an inherited IRA every year?
It depends on who you are and when the original owner died. Many non-spouse beneficiaries only face the 10-year deadline, but if the owner had already reached their required beginning date for RMDs, IRS final regulations generally require annual withdrawals in years one through nine as well. Check IRS Publication 590-B or ask the custodian which rule applies to your account.
Do I pay the 10% early withdrawal penalty on an inherited IRA?
No. Distributions to a beneficiary because of the owner's death are exempt from the 10% additional tax, whatever the beneficiary's age. Withdrawals from an inherited traditional IRA are still taxed as ordinary income, however. A surviving spouse who rolls the account into their own IRA gives up that exemption for the rolled-over money.
Can I move an inherited IRA to a different brokerage?
Yes, but non-spouse beneficiaries should use a direct trustee-to-trustee transfer into an account titled as an inherited IRA. If the money is paid out to you instead, a non-spouse beneficiary cannot put it back through a 60-day rollover, so the whole amount becomes a taxable distribution.
