If you’ve been named on someone’s IRA or 401(k), the designated beneficiary IRA distribution rules sort you into one of three groups, and that grouping sets your timeline. A surviving spouse gets the most flexibility, including the option to treat the account as their own. A narrow set of non-spouse heirs called eligible designated beneficiaries can still stretch withdrawals over their own life expectancy. Everyone else — most adult children, siblings, and friends who inherit — falls under the 10-year rule and must empty the account by December 31 of the tenth year after the owner’s death.1Internal Revenue Service. Retirement Topics – Beneficiary
The SECURE Act of 2019 is what collapsed the old “stretch IRA” option for most heirs, and SECURE 2.0 added further wrinkles that took effect in 2024 and 2025. Which rules apply to you depends on your relationship to the person who died, their age at death, and in some cases their medical status or yours.
Which Category You Fall Into
Your category is fixed as of the account owner’s date of death, with limited cleanup possible before a September 30 deadline described further down.
- Surviving spouse: the widest range of options, including rolling the inherited balance into your own IRA.
- Eligible designated beneficiary (EDB): a minor child of the account owner, a disabled or chronically ill person, or anyone not more than 10 years younger than the deceased owner.
- Non-eligible designated beneficiary (NEDB): every other named individual. Subject to the 10-year rule.
One threshold point: to be a “designated beneficiary” at all, you have to be an individual named on the account (or identified through the plan’s default terms).2Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans Estates, charities, and most trusts named directly can receive the money but face different, shorter timelines; the rules below are for people.
If You’re the Surviving Spouse
Three paths are available, and the right one depends mainly on your age and whether you need the money soon.
Roll It Into Your Own IRA
The most powerful option is treating the inherited account as your own IRA. You combine the balance with your existing retirement funds, and required minimum distributions don’t start until you reach your own RMD age. That age is 73 if you were born between 1951 and 1959, and 75 if you were born in 1960 or later.3Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners The rollover itself is tax-free, you choose the investments, and you can name new beneficiaries.
The catch is age. If you’re under 59½ and you roll the funds into your own IRA, any withdrawal before 59½ triggers a 10% early distribution penalty on top of ordinary income tax. For a younger spouse who needs cash, this option can backfire.
Keep It as an Inherited IRA (Section 327 Election)
SECURE 2.0’s Section 327, effective for distributions starting in 2024, lets you keep the account as an inherited IRA while being treated as the deceased owner for RMD purposes.4Internal Revenue Service. Internal Revenue Bulletin 2024-33 – Section 327 Election Proposed Regulations If the account owner died before their required beginning date, this treatment applies automatically with no formal election.
Two advantages matter here. First, distributions from an inherited IRA are never subject to the 10% early withdrawal penalty, whatever your age. Second, you can delay RMDs until the year the deceased owner would have reached their RMD age, and you calculate those RMDs with the more favorable Uniform Lifetime Table rather than the Single Life Table, which produces smaller required withdrawals.
You’re not locked in. At any point, you can still roll the remaining balance into your own IRA if your circumstances change.
Take the Standard Beneficiary Treatment
You can also elect to follow the same 10-year rule a non-spouse beneficiary would use. This rarely helps for tax purposes, but it’s on the menu.
The 10-Year Rule
Most adult children, siblings, and other non-spouse individuals who inherit after 2019 are non-eligible designated beneficiaries. The entire account has to be empty by December 31 of the tenth calendar year after the owner’s death.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Inherit in 2025, and the account must be gone by the end of 2035.
Do You Also Owe Annual RMDs Along the Way?
That depends on how old the account owner was when they died. If the owner died on or after their required beginning date, you must take an annual minimum distribution in each of years one through nine, with whatever remains due in year ten. If the owner died before their RBD, no annual distributions are required — you can take the money on any schedule, so long as the account is empty by the end of year ten.
The IRS waived penalties for missed annual RMDs under the 10-year rule from 2021 through 2024 while the regulations were finalized.6Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions for 2024 That relief has ended. Starting with the 2025 tax year, beneficiaries who owe annual RMDs during the 10-year window must take them.
Thinking About the Tax Hit
Taking the whole balance as a lump sum means every dollar is ordinary income in a single year, which can push you into a much higher bracket. Spreading the distributions across the window usually produces better tax results, though the right pattern depends on your projected income each year. If you expect a few low-income years — a career change, a sabbatical, early retirement — those are often the best years to pull more out.
Inherited Roth IRAs are still subject to the 10-year rule, but distributions come out tax-free. The usual move with an inherited Roth is to leave it alone to grow and distribute everything in year ten.
If You Qualify as an Eligible Designated Beneficiary
EDBs are the only non-spouse individuals who can still stretch distributions over their own life expectancy, taking annual RMDs based on their age rather than racing a 10-year clock. The qualifying categories are narrow:1Internal Revenue Service. Retirement Topics – Beneficiary
- Minor children of the account owner. Only the owner’s own children qualify, not grandchildren, nieces, nephews, or stepchildren unless legally adopted. The life expectancy method applies while the child is under 21, then the 10-year rule takes over and the remaining balance must be distributed by the end of the tenth year after the child’s 21st birthday.
- Disabled individuals. The beneficiary must be unable to engage in any substantial gainful activity because of a physical or mental impairment expected to be long-lasting or indefinite. Anyone already receiving Social Security disability benefits or SSI at the time of the owner’s death automatically qualifies.
- Chronically ill individuals. The beneficiary must be unable to perform at least two activities of daily living for an indefinite period expected to be lengthy.
- Individuals not more than 10 years younger than the deceased owner. A close-in-age sibling or friend, for example.
Documentation if You’re Claiming Disability or Chronic Illness
Self-certification isn’t accepted. A licensed healthcare practitioner has to certify the condition, and you must have been disabled or chronically ill at the time the account owner died. The documentation has to be submitted by October 31 of the year after the owner’s death. If you’re already on Social Security disability, separate medical certification isn’t needed, but you do have to provide proof of the benefits.
The Minor-to-Adult Switch
A child who inherits at age 10 takes life-expectancy RMDs for 11 years until turning 21. The 10-year clock then starts, and the remaining balance must be fully distributed by the time the child is 31. The total deferral can reach roughly 20 years. Better than the straight 10-year rule, well short of the old stretch IRA.
Key Deadlines After the Owner’s Death
Two dates in the year following the death reshape what rules apply and who they apply to.
September 30 — the beneficiary determination date. The IRS looks at who remains as a beneficiary on this date, not just who was named on the original form.1Internal Revenue Service. Retirement Topics – Beneficiary If a co-beneficiary disclaims or cashes out before September 30, they’re removed from the calculation, and the remaining beneficiaries’ rules can shift. This matters most when individual and non-individual beneficiaries are mixed on the same account. If a charity named alongside you receives its share before September 30, you can be treated as the sole designated beneficiary and get the 10-year rule instead of a worse timeline.
December 31 — the deadline to split a shared account. When multiple individuals inherit the same account, each can establish a separate inherited IRA by December 31 of the year after the owner’s death. Splitting lets each beneficiary use their own distribution schedule. Miss the split and all beneficiaries are stuck using the oldest beneficiary’s life expectancy, or for NEDBs the 10-year rule applies uniformly. The failure to split can also prevent a surviving spouse from moving their share into their own IRA.
What a Missed RMD Costs
If you fail to take a required distribution — your own or from an inherited account — the IRS imposes a 25% excise tax on the amount you should have withdrawn.7Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Catch it and withdraw the missed amount within two years and the penalty drops to 10%. If you missed the deadline for reasonable cause and can demonstrate that to the IRS, the penalty can be waived entirely.
This penalty applies to inherited-account RMDs just as it does to RMDs from accounts you own. The annual RMD during the 10-year window is particularly easy to overlook because the IRS waived enforcement of it from 2021 through 2024. That grace period is over. Beneficiaries who owe annual RMDs for 2025 and later face the full penalty if they miss them.
If the Account Named a Trust, Estate, or Charity Instead of You
The rules above cover individual beneficiaries. If you’re inheriting through a trust, or if the account defaulted to an estate because no one was named, different timelines apply, and in the trust case the terms of the trust itself determine when money reaches you. An estate beneficiary generally faces either a five-year payout (if the owner died before their RBD) or a payout over the owner’s remaining life expectancy (if after), and in both cases the income is taxed at the compressed rates applied to estates and trusts.8Internal Revenue Service. Form 1041-ES Estimated Income Tax for Estates and Trusts If a trust was named as your account’s beneficiary — especially a conduit trust drafted before 2020 — the interaction with the 10-year rule has made many older plans work very differently than their drafters intended, and the document should be reviewed with an estate attorney before you rely on it.