Inherited IRA RMDs: Rules, Beneficiary Categories, and Penalties

The rules for required minimum distributions from an inherited IRA turn on two things: who you are to the person who died, and whether that person had reached their required beginning date (RBD) before passing. Those two facts decide whether you have decades to draw the account down, ten years, five years, or something in between, and whether you owe an annual withdrawal along the way. The SECURE Act of 2019 ended the lifetime stretch for most non-spouse beneficiaries, and final IRS regulations published in 2024 confirmed that many beneficiaries inside the 10-year window must also take yearly RMDs rather than simply emptying the account by the deadline.¹ Those final regulations took effect for calendar years beginning January 1, 2025.

Start by Identifying Your Beneficiary Category

The IRS puts inherited IRA beneficiaries into three groups, and your group controls your timeline.

Eligible designated beneficiaries (EDBs) are the only individuals who can still spread withdrawals over their own life expectancy. You qualify as an EDB if you are the surviving spouse, a minor child of the deceased owner who has not yet reached age 21, a disabled individual as defined by the IRS, a chronically ill individual, or a person who is not more than 10 years younger than the deceased owner.² Grandchildren, stepchildren, and other minors do not qualify as EDBs on the “minor child” ground.

Designated beneficiaries (DBs) are individuals named on the account who don’t fit any EDB category. Most adult children, grandchildren, siblings, and friends land here. DBs must empty the inherited IRA within 10 years.

Non-designated beneficiaries (NDBs) are entities rather than people: estates, certain charities, and trusts that fail the IRS “see-through” test. Their rules depend on whether the owner died before or after their RBD.

The 10-Year Rule and When Annual RMDs Apply

If you’re a designated beneficiary who is not an EDB, the inherited IRA must be fully distributed by December 31 of the year containing the tenth anniversary of the owner’s death.² Whether you also owe annual withdrawals in years one through nine depends on the owner’s age at death.

The required beginning date is April 1 of the year after the owner turned 73. That threshold rises to 75 for individuals born in 1960 or later, starting in 2033.³

If the Owner Died Before Their RBD

No annual RMDs are required during years one through nine. You can let the account grow and withdraw everything in year 10, or take distributions in any pattern you like, as long as the balance hits zero by the final deadline. This gives you real room to manage your tax bracket from year to year.

If the Owner Died On or After Their RBD

You owe an annual RMD in years one through nine, and you still have to empty the account by the end of year 10.¹ Each year’s amount is calculated using your life expectancy factor from the IRS Single Life Expectancy Table.

This annual requirement blindsided many beneficiaries. The IRS waived penalties for missed annual RMDs during 2021 through 2024 while the regulations were being finalized.⁴ That grace period is over. If you’ve been skipping annual withdrawals in this category, you need to start now.

How to Calculate the Annual Amount

The formula is the same across every method that requires annual withdrawals: divide the inherited IRA’s fair market value as of December 31 of the prior year by your applicable life expectancy factor.⁵

To find your starting factor, look up your age in the year after the owner’s death in the IRS Single Life Expectancy Table (Table I in Publication 590-B). That number is your initial life expectancy factor. In each subsequent year, you subtract one rather than looking up a new figure. If your starting factor at age 50 is 36.2, next year’s factor is 35.2, the year after is 34.2, and so on.

Your first RMD is due by December 31 of the year after the owner’s death. Every subsequent RMD is also due by December 31 of its calendar year. There is no April 1 extension on an inherited IRA, unlike the one that applies to an original owner’s first RMD.

If You’re the Surviving Spouse

Surviving spouses have more choices than any other beneficiary, and the right call depends heavily on your age and your cash needs. A surviving spouse can do any of the following:²

Roll the account into your own IRA. It’s treated as if it had always been yours. RMDs don’t begin until you reach your own RBD, and you can name new beneficiaries.
Keep it as an inherited IRA and take life expectancy distributions. You can delay the start of distributions until December 31 of the year the deceased owner would have turned 73.
Use the 10-year rule and empty the account within a decade.

Rolling over looks like the obvious move, but it isn’t always best. If you’re under 59½, any withdrawals from your own IRA after the rollover will trigger the 10% early withdrawal penalty. Distributions from an inherited IRA are exempt from that penalty because they are taken on account of the owner’s death.⁶ A younger spouse who may need the money before 59½ should think twice before rolling over.

If You Qualify as an Eligible Designated Beneficiary (Non-Spouse)

Non-spouse EDBs can use the life expectancy method, which often means decades of continued tax-deferred growth. Your first distribution is due by December 31 of the year following the owner’s death. You use the same calculation described earlier: prior year-end balance divided by your starting factor, with the factor reduced by one each year.

For a minor child of the deceased owner, EDB status lasts until age 21. During those years, RMDs come out on the life expectancy schedule. Once the child turns 21, the 10-year clock starts, and the remaining balance must be distributed by December 31 of the year containing the tenth anniversary of the child reaching 21. A child who inherits at age 5 could have distributions running roughly 26 years in total: about 16 years of life expectancy distributions, then 10 years to empty the rest. Only biological or adopted children of the deceased qualify.

If the Beneficiary Is a Trust or an Estate

Where the beneficiary is an entity, the rules split along the RBD line.

Owner died before their RBD: the entire account must be emptied by December 31 of the fifth year after the year of death. No annual distributions are required in those five years.⁷
Owner died on or after their RBD: annual distributions are calculated using the deceased owner’s remaining single life expectancy, reduced by one each year. This “ghost life expectancy” method often stretches payouts longer than the 5-year rule.

A trust can avoid NDB treatment by qualifying as a “see-through” trust. To qualify, the trust must be valid under state law, become irrevocable no later than the owner’s death, have identifiable underlying beneficiaries, and provide a copy of the trust document to the IRA custodian by October 31 of the year following the owner’s death. When it qualifies, the IRS looks through to the trust beneficiaries and applies the distribution rules based on the oldest one: life expectancy if that person is an EDB, 10-year rule if a DB. A trust that fails these tests is treated as an NDB, which compresses the payout and often pushes trust income into the 37% top federal rate once it exceeds roughly $15,000.

Inherited Roth IRAs

Roth IRAs follow the same beneficiary categories and the same timeline rules as traditional IRAs, with one enormous advantage: qualified distributions come out entirely free of federal income tax.² Contributions can always be withdrawn tax-free, and earnings are tax-free as long as the Roth account has been open at least five years, counting from when the original owner first funded any Roth IRA.

There’s a second advantage for Roth beneficiaries operating under the 10-year rule. Original Roth owners never had a lifetime RMD obligation, so they have no required beginning date. Every Roth owner is therefore treated as having died before their RBD, no matter their age. The result: a designated beneficiary of a Roth IRA owes no annual RMDs in years one through nine. You can let the account grow tax-free for a full decade and withdraw everything in year 10. The account still must be fully emptied by that deadline, though, or the excise tax applies to whatever’s left.

How Distributions Are Taxed

Distributions from an inherited traditional IRA are taxed as ordinary income in the year you receive them, the same way they would have been taxed to the original owner.⁵ The custodian will withhold federal income tax unless you elect out. For a non-periodic distribution such as a lump sum, the default withholding is 10%.

That 10% often falls well short of what you actually owe, especially on larger withdrawals that push you into a higher bracket. If you inherited a sizable traditional IRA under the 10-year rule, spreading withdrawals across multiple years to stay in lower brackets will usually cost less than taking everything in year 10. On a $500,000 balance, the gap between a 22% and a 37% marginal rate is $75,000 in federal tax alone.

One bright spot across the board: distributions from an inherited IRA are exempt from the 10% early withdrawal penalty regardless of the beneficiary’s age. The exemption applies to both traditional and Roth accounts.⁶ It disappears if a surviving spouse rolls the account into their own IRA and then withdraws before 59½.

Penalty for Missing an RMD

The excise tax for failing to take a required distribution is 25% of the shortfall, the difference between what you should have withdrawn and what you actually took.⁸ The SECURE 2.0 Act reduced it from 50%, but the current rate is still high enough to matter.

The penalty drops to 10% if you correct the shortfall within the statutory correction window. That window runs from when the penalty is imposed until the earliest of three events: the IRS mails you a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the year you missed the RMD.⁸ In practical terms, if you missed an RMD for 2025, you generally have until December 31, 2027, to take the missed distribution, file an amended return at the 10% rate, and pay.

You report the penalty on Form 5329 with your individual tax return.⁹ If the failure was due to reasonable error and you’ve since taken the full distribution, you can ask the IRS to waive the penalty entirely. The instructions for Form 5329 explain how to request the waiver.¹⁰

Title the Account Correctly

This administrative detail causes big problems when it’s wrong. An inherited IRA must keep the deceased owner’s name in the account title, and the title should make clear both that the account is inherited and that you are the beneficiary. A typical format reads something like “Jane Doe, deceased, IRA for benefit of John Doe, beneficiary.” The exact wording varies by custodian. If the account is retitled solely in your name, with no indication it’s inherited, the IRS may treat the entire balance as a taxable distribution in that year. Get the paperwork right at the start and the rest of the rules work the way they’re meant to.

1
Federal Register. Required Minimum Distributions
2
Internal Revenue Service. Retirement Topics – Beneficiary
3
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
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Internal Revenue Service. IRS Notice 2024-35 – Certain Required Minimum Distributions for 2024
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Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
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Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
8
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
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Internal Revenue Service. About Form 5329, Additional Taxes on Qualified Plans
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Internal Revenue Service. Instructions for Form 5329