Inherited IRA Rules: What You Must Do and When

Inheriting an IRA is one of the more complex financial events a person can face, made more so by the SECURE Act of 2019 and subsequent IRS guidance that dramatically changed the rules most people inherited from the previous framework.

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 Failing to follow the correct distribution rules can result in a 25% IRS penalty on amounts that should have been withdrawn. The rules differ significantly 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 Two Categories That Determine Your Rules

The first thing to establish: your classification as a beneficiary.

Eligible Designated Beneficiaries (EDB): A narrow category with more favorable rules:

• Surviving spouse
• Minor child of the account owner (not grandchildren, not nieces/nephews)
• Chronically ill individual (as defined under IRC Section 7702B)
• Disabled individual (as defined under IRC Section 72(m)(7))
• Individual not more than 10 years younger than the deceased

Non-Eligible Designated Beneficiaries (Non-EDB): Everyone else, including:

• Adult children
• Grandchildren
• Siblings
• Friends
• Most non-spouse family members

Non-Designated Beneficiaries: Non-person beneficiaries such as trusts, charities, or estates (special rules apply, not covered in full here).

The 10-Year Rule for Non-EDB Beneficiaries (Most People)

If you inherited an IRA from someone who died after December 31, 2019, and you are a Non-EDB (adult child, sibling, friend, most people), the SECURE Act's 10-Year Rule applies.

The 10-Year Rule requires you to fully distribute the inherited IRA by December 31 of the tenth year following the account owner's death. There is no specific annual distribution requirement for most people, but the account must be empty by the end of year 10.

Critical update from 2024 IRS guidance: The IRS finalized regulations in 2024 clarifying that if the original owner had already reached their Required Beginning Date (the age at which required minimum distributions begin, currently age 73), the beneficiary must take annual RMDs during years 1-9 in addition to fully emptying the account by year 10. If the original owner had not yet reached their Required Beginning Date, annual RMDs are not required during the 10-year period but the account must still be emptied by year 10.

This distinction is significant. If you inherited a large IRA from a parent who was already taking RMDs, you have required annual withdrawals to take, not just a final deadline.

Rules for Surviving Spouses

A surviving spouse has the most options and the most flexibility of any beneficiary category.

Option 1: Roll the inherited IRA into your own IRA. The spouse treats the account as their own. This is the most common choice because it delays required minimum distributions until the spouse's own Required Beginning Date (age 73) and allows continued tax-deferred growth.

Option 2: Keep it as an inherited IRA. If the spouse is younger than 59.5 and the deceased was already taking distributions, keeping the account as an inherited IRA allows withdrawals without the 10% early withdrawal penalty that would apply to a rollover IRA. This is useful if the spouse needs income before age 59.5.

Option 3: 10-Year Rule (rare). Spouses can elect this but rarely should.

Rules for Minor Children

A minor child of the account owner (not grandchild) qualifies as an EDB and can stretch distributions over their life expectancy during minority. However, once the child reaches age of majority (generally 18, or 21 if still in school per IRS rules), the 10-Year Rule kicks in from that date. The account must be emptied within 10 years of the minor reaching adulthood.

Rules for "Not More Than 10 Years Younger" EDB

An individual who is within 10 years of the deceased's age qualifies as an EDB and can take distributions over their own life expectancy using the IRS Single Life Expectancy Table. This can stretch distributions over many years, similar to the old "stretch IRA" rules that applied to most beneficiaries before the SECURE Act.

Roth IRA Inheritance Rules

A Roth IRA follows the same beneficiary categories and 10-Year Rule structure, but with one critical difference: qualified distributions from an inherited Roth IRA are tax-free.

Because Roth IRA owners are not subject to RMDs, the original owner's Required Beginning Date status does not affect whether beneficiaries have annual RMD requirements during the 10-year period. Non-EDB beneficiaries of Roth IRAs are not required to take annual distributions in years 1-9; they just must empty the account by year 10.

For an inherited Roth IRA, the tax treatment makes strategic timing of distributions important: since all growth within the inherited Roth grows tax-free, allowing the account to grow as long as possible within the 10-year window maximizes the tax-free compounding benefit.

Practical Steps When You Inherit an IRA

Step 1: Notify the IRA custodian.

Contact the financial institution holding the IRA and notify them of the account owner's death. They will send paperwork to retitle the account as an inherited IRA. Do not withdraw or close the account before understanding your options.

Step 2: Establish the inherited IRA correctly.

The account must be retitled as "FBO [your name] as beneficiary of [deceased name]." If you are a spouse rolling into your own IRA, that is a separate step. Do not commingle inherited IRA funds with your own IRA if you are a non-spouse beneficiary; this is a prohibited transaction.

Step 3: Identify your beneficiary category.

Your category (EDB vs. Non-EDB) determines your rules. Confirm the original owner's date of death and whether they had reached their Required Beginning Date.

Step 4: Determine your distribution requirement.

• Non-EDB and the original owner had reached RBD: you must take annual distributions in years 1-9 and fully distribute by year 10
• Non-EDB and the original owner had not reached RBD: no required annual distributions, but empty by year 10
• Surviving spouse rollover: your own RMD rules apply at age 73

Step 5: Plan the distribution strategy for tax efficiency.

Taking large distributions in a single year pushes you into higher tax brackets. Spreading distributions over the 10-year period allows better income control.

Tax Planning Within the 10-Year Rule

The 10-Year Rule creates a forced recognition of income across a decade. The tax efficiency of how you distribute matters.

Strategy 1: Equal distributions over 10 years. Spreading $200,000 across 10 years means $20,000 per year of additional income rather than a lump sum, which keeps you in a lower tax bracket.

Strategy 2: Front-load in low-income years. If your income is unusually low in years 1-3 (job change, parental leave, early retirement), take larger distributions in those years when your marginal rate is lower.

Strategy 3: Back-load if income will decline. If you are approaching retirement and expect lower income in years 7-10, defer more of the distributions to those years.

Roth conversion consideration: If you inherit a traditional IRA during a period of low income, you could take distributions from the inherited IRA and use the funds to make additional contributions to your own Roth IRA (if you have earned income) or simply take the distributions as income and accept the tax bill while your bracket is favorable.

Real-World Examples

Example: David, 42, inheriting a traditional IRA from his father

Situation: David's father passed away at 76, already taking required minimum distributions. The IRA balance at the time of inheritance was $185,000. David is a Non-EDB (adult child).

Rules that apply: 10-Year Rule, and because his father had reached his Required Beginning Date, David must also take annual RMDs during years 1-9 using the IRS Single Life Expectancy Table.

What he does: He consults a tax advisor, who calculates his annual RMD for years 1-9 and confirms he must take approximately $10,000-12,000 per year based on his life expectancy factor. He plans the distributions to coincide with years when his own income is lower (sabbatical he has planned).

Example: Mia, 35, inheriting a Roth IRA from her aunt

Situation: Mia inherits a $90,000 Roth IRA from her aunt. She is a Non-EDB (non-spouse, not within 10 years of age). The Roth account was more than five years old.

Rules that apply: 10-Year Rule, but no annual RMD requirement during years 1-9 (because original Roth IRA owners have no RBD).

What she does: She leaves the inherited Roth IRA invested for nine years and takes the full distribution in year 10. The $90,000 principal grows to approximately $162,000 at 7% over 9 years. She withdraws the full amount tax-free.

Common Mistakes

Rolling an inherited IRA into your own IRA (as a non-spouse beneficiary). This is an IRS prohibited transaction. Only surviving spouses can roll an inherited IRA into their own. Non-spouse beneficiaries must keep it as an inherited IRA. Violating this causes the entire account to be treated as a taxable distribution.

Missing annual RMD requirements for Non-EDB beneficiaries when the original owner was past their RBD. The IRS finalized enforcement of this rule in 2024. The penalty for failing to take required annual distributions is 25% (reduced to 10% if corrected promptly).

Assuming the rules are the same as before the SECURE Act. Pre-2020 rules allowed most beneficiaries to stretch distributions over their lifetime. That option is gone for most people who inherited after January 1, 2020.

Not coordinating inherited IRA income with other income. Large distributions from an inherited traditional IRA can push Social Security benefits into higher taxable territory, trigger Medicare IRMAA surcharges, and eliminate eligibility for certain credits. Plan the distribution schedule with the full picture of your income in each year.

For the baseline on how IRA accounts work before inheritance, see Traditional IRA vs Roth IRA: Which Should You Choose?. And if you are thinking about naming beneficiaries on your own accounts to simplify the inheritance process, the estate planning basics post covers beneficiary designations as part of a broader financial planning conversation.

This post is for informational purposes only and does not constitute financial, tax, or legal advice. Inherited IRA rules are complex and depend heavily on individual circumstances, relationship to the deceased, and timing. Consult a qualified tax advisor or estate planning attorney for guidance specific to your situation.