Inherited IRA Rules: What You Must Do and When

Inheriting an IRA is one of the more complex financial events a person can face. The SECURE Act of 2019 and the IRS final regulations issued in July 2024 (T.D. 10001) dramatically changed the rules most people inherited from the previous framework. 2025 was the first year the IRS began enforcing the annual RMD requirements after four years of penalty relief. If you inherited an IRA from someone who died in 2020 or later, the choices you make now could cost or save tens of thousands of dollars.

The stakes are real. Failing to follow the correct distribution rules can result in a 25% IRS penalty on amounts that should have been withdrawn, reduced to 10% if corrected within two years under SECURE 2.0. The rules differ based on your relationship to the deceased, when the original account owner died, and what type of IRA you inherited.

This post covers the rules as they stand in 2026 for the most common situations.

The 10-Year Rule: What Most Beneficiaries Face

The SECURE Act eliminated the "stretch IRA" for most non-spouse beneficiaries who inherited an IRA after December 31, 2019. Under the old rules, a beneficiary could take small distributions over their own life expectancy, letting the bulk of the account compound tax-deferred for decades. That option is gone for most people.

In its place is the 10-year rule. The inherited account must be completely emptied by December 31 of the 10th calendar year following the original owner's year of death. If your father died in 2024, the account must be at zero by December 31, 2034. If he died in 2026, the deadline is December 31, 2036.

There is no minimum distribution requirement during years 1 through 9 under the 10-year rule alone. You could take nothing for nine years and withdraw the entire balance in year 10. Or you could spread distributions evenly. The only firm requirement is that the balance reaches zero by the deadline.

The annual RMD trap

Here is the part that confused everyone, including the IRS, for nearly five years. The IRS final regulations published July 19, 2024 settled a critical question: do beneficiaries also have to take annual RMDs during the 10-year window, or can they wait and empty the account in year 10?

The answer depends on whether the original IRA owner had already reached their Required Beginning Date (RBD) when they died. The RBD is April 1 of the year after the owner turns their RMD age, which is 73 under SECURE 2.0 for people who reach that age between 2023 and 2032, rising to 75 starting in 2033.

The IRS waived penalties for missed annual RMDs from 2021 through 2024 while the regulations were being finalized. That waiver is over. 2025 was the first enforcement year, and the penalty for a missed RMD is a 25% excise tax on the shortfall, potentially reduced to 10% if you correct it within the IRS correction window and file Form 5329.

Inherited Roth IRAs

Inherited Roth IRAs are subject to the 10-year rule, but the annual RMD requirement inside that window does not apply. Because Roth IRA owners have no lifetime RMDs, there is no RBD to trigger the annual distribution requirement. A beneficiary of an inherited Roth IRA can wait until year 10 and take the entire balance tax-free, assuming the 5-year holding period for qualified distributions is met. The deceased's holding period counts toward the beneficiary's 5-year requirement.

For more on Roth IRAs generally, see our guide on Roth IRA tax savings and our Roth IRA glossary term.

Who Escapes the 10-Year Rule: Eligible Designated Beneficiaries

Five categories of beneficiaries are exempt from the 10-year rule and can still use the old life-expectancy stretch, taking annual RMDs based on their own life expectancy:

1. Surviving spouse. A spouse can roll the inherited IRA into their own IRA, delaying RMDs until they reach age 73. A spouse under 59.5 can keep the inherited IRA to access funds penalty-free, then roll it to their own IRA later.

1. Minor child of the decedent. Not a grandchild, niece, or stepchild. The stretch lasts until the child reaches the age of majority (typically 18 or 21, depending on state). At that point, the 10-year countdown begins.

1. Disabled beneficiary. As defined under IRS rules in Section 72(m)(7). Must be unable to engage in any substantial gainful activity due to a physical or mental impairment.

1. Chronically ill beneficiary. Requires certification that the person cannot perform at least two activities of daily living for at least 90 days.

1. Individual not more than 10 years younger than the decedent. Often a sibling, partner, or close-in-age friend.

If you fit one of these five categories, the 10-year rule generally does not apply. You can take life-expectancy RMDs across a much longer horizon.

Spousal Options: The Most Flexible Rules

A surviving spouse has the most options of any beneficiary:

• Roll to own IRA. The inherited IRA becomes the spouse's own IRA. RMDs are delayed until the spouse reaches age 73. This is almost always the best choice for spouses over 59.5.
• Keep as inherited IRA. The spouse can take penalty-free distributions before 59.5. RMDs are based on the deceased spouse's age (or the survivor's age if younger). No new contributions allowed.
• Disclaim. A spouse can refuse the inheritance within 9 months of the death, letting it pass to contingent beneficiaries.
• Lump sum. Take everything at once. Usually a bad idea because it creates a large tax bill in a single year.

For spouses under 59.5 who need income, keeping the inherited IRA is often the right move because it preserves penalty-free access. For spouses over 59.5, rolling to their own IRA is almost always optimal because it delays RMDs and allows new contributions.

Non-Spouse Beneficiaries: Your Options

If you are not the surviving spouse and not an eligible designated beneficiary, you are a non-eligible designated beneficiary (NEDB). You are subject to the 10-year rule. Your options are limited:

• Take distributions over 10 years. You choose how much to take each year, as long as the account is empty by December 31 of year 10. If the decedent died on or after their RBD, you must also take annual RMDs in years 1 through 9.
• Take a lump sum. You can withdraw everything immediately. This is usually tax-inefficient because it pushes you into a higher tax bracket in a single year.
• Disclaim. You can refuse the inheritance within 9 months, letting it pass to contingent beneficiaries.

The key planning opportunity is timing. If no annual RMDs are required (decedent died before RBD), you can wait until year 10 and take everything. Or you can spread distributions across years to minimize the tax hit in any single year.

Tax Strategy: Spreading Distributions Over 10 Years

The biggest mistake beneficiaries make is waiting until year 10 to take everything. A large distribution in a single year can push you into the 32% or 35% tax bracket, costing far more than if you had spread the same amount over 10 years.

Example: The cost of waiting

Example: Rachel inherits a $500,000 traditional IRA

Situation: Rachel, 45, inherits a $500,000 traditional IRA from her father, who died in 2026 at age 71 (before his RBD). She is subject to the 10-year rule with no annual RMD requirement.

Option A (wait until year 10): She takes nothing for 9 years. The account grows at 7% to approximately $918,000. In year 10, she withdraws everything. The $918,000 is added to her $85,000 salary, putting her total income at over $1 million. She pays approximately $300,000 in federal income tax.

Option B (spread over 10 years): She withdraws approximately $60,000/year for 10 years. Each year, the $60,000 adds to her $85,000 salary for $145,000 total. She stays in the 24% bracket. Total tax over 10 years: approximately $144,000.

Difference: Spreading distributions saves approximately $156,000 in federal tax.

Example: Mark inherits a $200,000 traditional IRA, decedent died after RBD

Situation: Mark, 50, inherits a $200,000 traditional IRA from his mother, who died in 2026 at age 78 (after her RBD). He must take annual RMDs in years 1 through 9 AND empty the account by year 10.

What he must do: Calculate his annual RMD using the IRS Single Life Expectancy Table. Year 1 RMD: $200,000 divided by 36.2 (life expectancy factor for a 50-year-old) = $5,525. Each subsequent year, the factor decreases by 1.

Risk: If Mark misses an annual RMD, he faces a 25% penalty on the shortfall. If his Year 1 RMD is $5,525 and he takes nothing, the penalty is $1,381 (25% of $5,525), reduced to $553 (10%) if he corrects within two years.

Inherited IRA vs Inherited Roth IRA

Common Mistakes

Missing the 10-year deadline. If the account is not empty by December 31 of year 10, the entire remaining balance is subject to the 25% penalty. This is the most expensive mistake you can make.

Missing annual RMDs when required. If the decedent died on or after their RBD, you must take annual RMDs in years 1 through 9. The IRS waived penalties for 2021 through 2024, but enforcement resumed in 2025.

Taking a lump sum. Withdrawing everything in year 1 pushes you into a high tax bracket. Spread distributions over multiple years to minimize tax.

Not checking if you are an eligible designated beneficiary. If you qualify as an EDB, you can use the life-expectancy stretch instead of the 10-year rule. This could save significant taxes over your lifetime.

Forgetting the year-of-death RMD. If the original owner died in a year they had an RMD but had not yet taken it, the beneficiary must take that RMD by December 31 of the year of death.

Not considering a spousal rollover. Surviving spouses over 59.5 should almost always roll the inherited IRA to their own IRA to delay RMDs.

Rolling an inherited IRA into your own IRA as a non-spouse. This is a prohibited transaction. Only surviving spouses can do this. Non-spouse beneficiaries must keep the inherited IRA in its own account.

Estate Planning Considerations

The 2026 federal estate tax exemption is $15 million per individual, $30 million per married couple, made permanent by the One Big Beautiful Bill Act of 2025. Most estates will not owe federal estate tax. But inherited IRAs are still subject to the distribution rules regardless of estate tax. See our estate tax glossary term for related planning concepts.

If you are doing estate planning, review your beneficiary designations regularly. The wrong beneficiary designation can force a non-spouse beneficiary into the 10-year rule when they might have qualified as an EDB. For larger estates, consider whether a trust as beneficiary makes sense, though trust beneficiaries are generally subject to the 10-year rule.

For related reading, see our guide on taxable brokerage accounts and our 401(k) glossary term.

Conclusion

Inheriting an IRA comes with strict rules and real penalties for getting them wrong. The 10-year rule applies to most non-spouse beneficiaries who inherited after 2019. If the original owner died on or after their Required Beginning Date, annual RMDs are also required in years 1 through 9. The 25% penalty for missed RMDs is now being enforced. Spouses have the most flexibility and should generally roll to their own IRA if over 59.5. Eligible designated beneficiaries can still use the life-expectancy stretch. Everyone else should spread distributions over the 10-year window to minimize taxes.

If you have inherited an IRA, contact the custodian immediately to confirm your beneficiary status and distribution requirements. Then calculate your RMD obligations and create a 10-year distribution plan that keeps you in the lowest possible tax bracket.

This post is for informational purposes only and does not constitute tax, legal, or financial advice. Inherited IRA rules are complex and depend on your specific situation. Consult a qualified tax professional or estate planning attorney before making decisions about an inherited IRA.