TL;DR: Inherited IRA rules determine how quickly beneficiaries must withdraw funds and whether annual required minimum distributions (RMDs) apply. Understanding your beneficiary status and planning withdrawals around your taxable income can help you meet IRS requirements while preserving more of the inheritance.
- Many non-spouse beneficiaries must empty an inherited IRA by December 31 of the tenth year after the original owner’s death.
- Annual RMDs may also be required if the owner died after reaching their required beginning date.
- Surviving spouses and other eligible designated beneficiaries may qualify for different options, including life expectancy distributions.
- Traditional inherited IRA withdrawals generally count as taxable income, so spreading distributions across multiple years may reduce the impact of a large final-year withdrawal.
- A missed RMD can trigger a 25% excise tax, although timely correction may reduce the rate to 10%.
Inheriting an IRA can give you more financial flexibility, but it also comes with deadlines. The IRS may require you to take money from the account each year or empty the account within a set period.
The inherited IRA RMD rules depend on who left you the account, when that person died, if they started required distributions, and your relationship to them. Knowing the rules can help you avoid penalties and make more thoughtful decisions about when to withdraw the money.
What Is an RMD?
A required minimum distribution, or RMD, is the minimum amount that must come out of certain retirement accounts under federal tax rules.
For IRA owners, RMDs generally apply to traditional, SEP, and SIMPLE IRAs. Roth IRA owners do not take RMDs during their lifetime, although beneficiaries may face distribution requirements after inheriting a Roth IRA.
So, what is an RMD when you inherit an IRA?
The answer depends on your beneficiary status. An inherited IRA follows different rules from an IRA you opened and funded yourself. In many cases, beneficiaries must follow either annual distribution requirements, a 10-year withdrawal deadline, or both.
How the Inherited IRA Distribution Rules Work
The SECURE Act changed many inherited IRA distribution rules for account owners who died after 2019.
For many non-spouse beneficiaries, the biggest change is the 10-year rule. Under this rule, the beneficiary must generally withdraw the full inherited IRA balance by December 31 of the year containing the 10th anniversary of the original owner's death.
For example, if an IRA owner died in 2025 and the 10-year rule applies, the beneficiary generally must empty the account by December 31, 2035.
That does not always mean you can leave all the money untouched for nine years and withdraw it in year 10.
Do You Have to Take Annual RMDs During the 10-Year Period?
This is one of the most confusing parts of the current inherited IRA RMD rules.
If a non-eligible designated beneficiary inherits an IRA from someone who died on or after their required beginning date, annual distributions generally must continue during the 10-year period. The account must also be fully distributed by the end of year 10.
Final Treasury regulations applying from 2025 confirms this approach.
If the original owner died before their required beginning date and the 10-year rule applies, the IRS generally does not require distributions during years one through nine. You can choose when to take withdrawals, provided you empty the account by the end of year 10. This distinction can have a major effect on your withdrawal strategy.
Who Counts as an Eligible Designated Beneficiary?
Some beneficiaries receive different treatment under the IRA beneficiary rules.
An eligible designated beneficiary generally includes:
- The surviving spouse
- A minor child of the account owner
- A disabled or chronically ill person
- Someone who is no more than 10 years younger than the account owner
These beneficiaries may qualify to take distributions using life expectancy rules rather than immediately following the standard 10-year rule. Special rules can still apply later, including when a minor child reaches adulthood or when an eligible designated beneficiary dies.
Rules for a Spouse Who Inherits an IRA
Surviving spouses usually have more choices than other beneficiaries. A spouse may be able to treat the inherited IRA as their own, roll eligible assets into their own IRA or retirement plan, or remain a beneficiary of the inherited account. The best approach can depend on the spouse's age, income, need for withdrawals, and the age of the deceased spouse.
For example, keeping the account as an inherited IRA may make sense in some situations when the surviving spouse wants access to the money before reaching the usual age for penalty-free withdrawals from their own IRA.
Because spousal IRA inheritance rules offer several paths, it often helps to compare the tax effect of each option before moving the money.
What Is an RMD on an IRA You Inherited?
If you are asking what is a RMD on an IRA, the calculation may depend on which beneficiary rules apply.
For beneficiaries who use life expectancy distributions, the IRS generally uses its Single Life Expectancy Table. The calculation starts with the applicable account balance and an IRS life expectancy factor.
Inherited IRA calculations can become more complicated when the 10-year rule also applies. Your IRA custodian may calculate an estimated RMD for you, but you remain responsible for taking the correct amount by the deadline.
What Happens if the Original Owner Had Not Taken Their Final RMD?
If the IRA owner died after reaching their required beginning date and had not completed that year's RMD, the remaining required amount generally still needs to come out of the account for the year of death.
The beneficiary or beneficiaries are responsible for making sure that distribution occurs. This requirement is separate from the distributions that may begin in the following year.
How Inherited IRA Withdrawals Affect Taxes
Traditional inherited IRA distributions generally count as taxable income to the beneficiary. That means the timing of withdrawals matters. Taking a large distribution in one year could increase your taxable income for that year. Spreading distributions across several years may produce a different tax result.
For example, a beneficiary subject to the 10-year rule could consider income from work, retirement, investments, and other sources when deciding how much to withdraw each year.
You still need to meet any annual RMD requirement that applies. Inherited Roth IRAs work differently. Qualified Roth distributions are generally tax-free, although the account can still be subject to inherited-account distribution deadlines.
How to Keep More of an Inherited IRA
Keeping more of an inheritance usually comes down to planning withdrawals before deadlines force your hand. Start by confirming the year the original owner died and whether they had reached their required beginning date. Then confirm your beneficiary category and whether annual RMDs apply.
From there, look at your expected taxable income across the full distribution period. Waiting until year 10 to take a large taxable withdrawal may create a very different result from spreading withdrawals over several years. Also check the inherited IRA each year. A change in account value does not remove the distribution deadline.
What Happens if You Miss an RMD?
Missing a required distribution can become expensive. The IRS may impose a 25% excise tax on the amount that should have been distributed. That rate can fall to 10% when the shortfall is corrected within the applicable two-year correction period.
The IRS may also waive the tax in some cases if you can show reasonable error and take steps to correct it. The rules can change depending on the details of the inheritance, so confirm your deadline before December rather than waiting until year-end. A financial advisor and estate planning services can help manage your options.
Make a Plan Before Taking the Money
The inherited IRA RMD rules affect when money must leave the account, but they can also influence when you pay income tax on the inheritance.
Before taking a large withdrawal, identify which IRA beneficiary rules apply to you. Check whether annual RMDs are required, confirm the final deadline for emptying the account, and review how each withdrawal could affect your taxable income.
A tax professional or financial professional can also help you apply the inherited IRA distribution rules to your specific account and beneficiary status.
The money may have come to you unexpectedly. A clear withdrawal plan can help you preserve more of it while meeting the IRS requirements. Need help? Get your free portfolio review.
A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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