Originally published October 2015. Last updated March 2026.
Inheriting an IRA from a spouse or family member can be a financial benefit, but the rules around inherited IRAs have changed significantly since the SECURE Act of 2019 and SECURE 2.0 Act of 2022. If you’re still following the old rules, you could end up with unexpected tax bills or IRS penalties.
Here’s what you actually need to know.
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The Big Change: The 10-Year Rule
Before 2020, non-spouse beneficiaries could “stretch” inherited IRA distributions over their own life expectancy. That’s gone for most people.
Under the SECURE Act, most non-spouse beneficiaries who inherit an IRA after December 31, 2019 must withdraw the entire account within 10 years of the original owner’s death. No exceptions for the balance, no stretching it out over 30 or 40 years.
And in 2024, the IRS finalized rules clarifying that if the original owner had already started taking required minimum distributions (RMDs), the beneficiary must take annual RMDs during that 10-year window AND empty the account by year 10. You can’t just wait until the end.
Rules for Spousal Beneficiaries
Spouses still have the most flexibility. Your options:
- Roll it into your own IRA. Treat it as your own. RMDs don’t start until you reach age 73 (or 75 if born after 1960). This is usually the best move if you don’t need the money right away.
- Stay in an inherited IRA. This can make sense if you’re under 59 and a half and need access to the funds without a 10% early withdrawal penalty.
- Disclaim all or part of it. If you don’t need the money, you can pass it to the contingent beneficiary. This can be a smart estate and tax planning move.
- Convert to a Roth IRA. Roll the inherited assets into your own traditional IRA, then convert to Roth. You’ll pay taxes on the conversion, but future growth and withdrawals are tax-free. No RMDs on Roth IRAs during your lifetime.
- Take a lump sum. You can, but you’ll owe income tax on the entire amount in one year. Rarely the best option.
Rules for Non-Spouse Beneficiaries
If you inherited an IRA from anyone other than your spouse (parent, sibling, friend), the 10-year rule applies unless you qualify for an exception.
The 10-year rule means: You must withdraw the entire inherited IRA balance by December 31 of the 10th year following the year of the owner’s death. If the original owner was already taking RMDs, you also need to take annual distributions during those 10 years.
Eligible designated beneficiaries (exceptions to the 10-year rule):
- Minor children of the original owner (but only until they reach the age of majority, then the 10-year clock starts)
- Disabled individuals (as defined by the IRS)
- Chronically ill individuals
- Beneficiaries who are not more than 10 years younger than the deceased
These groups can still use the old stretch method based on life expectancy.
Inherited Roth IRAs
Inherited Roth IRAs follow the same 10-year rule for non-spouse beneficiaries. The difference: withdrawals from an inherited Roth IRA are generally tax-free, as long as the original owner held the Roth for at least five years.
Spouses who inherit a Roth can roll it into their own Roth IRA and never take RMDs during their lifetime.
Common Mistakes to Avoid
- Not checking beneficiary designations. Your IRA beneficiary form overrides your will. If your ex-spouse is still listed, they get the money. Period. Review your forms.
- Naming your estate as beneficiary. This eliminates the stretch option for eligible designated beneficiaries and can accelerate the distribution timeline. Name individuals directly.
- Ignoring annual RMDs under the 10-year rule. If the original owner was already taking RMDs, you can’t just wait until year 10. The IRS penalty for missing an RMD is 25% of the amount you should have taken (reduced from 50% under SECURE 2.0, and further reduced to 10% if corrected within two years).
- Following outdated advice. A lot of inherited IRA guidance online still references the old stretch IRA rules. If you inherited an IRA after 2019, those rules don’t apply to you.
Tax Planning Strategies for Inherited IRAs
The 10-year rule creates a planning opportunity. You don’t have to take equal distributions each year. You can time your withdrawals to minimize your tax bracket:
- Take larger distributions in years when your income is lower (job change, sabbatical, early retirement)
- Take smaller distributions in high-income years
- Pair inherited IRA withdrawals with charitable giving strategies to offset the tax hit
- Consider Roth conversions of your own accounts separately to manage your overall tax picture
FAQ
Can I roll an inherited IRA into my own IRA?
Only if you’re the spouse. Non-spouse beneficiaries must keep it in a separate inherited IRA.
What happens if I miss the 10-year deadline?
The IRS can impose a 25% excise tax on the amount that should have been distributed. Under SECURE 2.0, this drops to 10% if you correct the error within two years.
Do I have to take money out every year?
It depends. If the original owner had already started RMDs (generally age 73+), yes, you must take annual distributions. If they died before RMDs began, you just need the account emptied by year 10.
Is there still a way to stretch an inherited IRA?
Only if you’re an eligible designated beneficiary: surviving spouse, minor child of the owner, disabled, chronically ill, or not more than 10 years younger than the deceased. Everyone else is on the 10-year clock.
The rules around inherited IRAs are more complicated than they used to be. If you’ve recently inherited retirement accounts, or you’re planning your own estate and want to set your beneficiaries up for the best outcome, it’s worth getting specific advice.
Schedule a free 20-minute consultation with our team to talk through your situation.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
