Inherited IRA Rollover Rules: Spouses vs. Non-Spouses

The rules for rolling over an inherited IRA come down to one fact: only a surviving spouse can move inherited retirement money into their own IRA. Every other beneficiary — children, siblings, friends, or anyone else named on the account — must open a separate inherited IRA and follow a distribution timeline set by law. Treating the assets any other way generally makes the entire balance taxable in the year you receive it.

What a Surviving Spouse Can Do

If you’re the sole beneficiary and you were married to the account owner, you have options no one else gets. You can roll the funds into your own traditional or Roth IRA and become the account owner outright.¹ After that, the inherited IRA is gone and your own retirement rules take over: no required minimum distributions until you reach age 73, and the 10% early withdrawal penalty applies if you tap the account before 59½.²

The rollover isn’t always the right move. If you’re under 59½ and might need the money, keeping the account as an inherited IRA lets you take distributions without the early withdrawal penalty. A spouse who keeps it as an inherited IRA can draw distributions based on their own life expectancy, follow the 10-year rule, or, if the original owner died before their required beginning date, delay distributions until the year the deceased would have turned 72.¹ A spouse can also use the direct transfer or, unlike other beneficiaries, a 60-day indirect rollover when moving funds into their own IRA.

Why Non-Spouses Cannot Roll Over

If you’re a child, sibling, friend, or any other non-spouse individual, rolling inherited IRA funds into your own retirement account is not allowed. Attempting it triggers immediate tax on the entire balance as ordinary income. The only correct method is a direct trustee-to-trustee transfer into a newly opened inherited IRA, where the money moves between custodians without ever touching your hands.³ The 60-day indirect rollover method is not available to non-spouse beneficiaries. A check made payable to you personally cannot be undone by depositing it into an inherited IRA; the distribution is taxable and stays taxable.⁴

Account titling is the other place non-spouse transfers go wrong. The new inherited IRA must be titled in a format that names both the deceased and the beneficiary, along the lines of “John Doe, deceased, for the benefit of Jane Doe, beneficiary.” If the title is wrong, the IRS can treat the whole transfer as a taxable distribution. Check the title on the account confirmation once the transfer clears.

Who Is Exempt From the 10-Year Rule

For accounts inherited from owners who died on or after January 1, 2020, the SECURE Act requires most non-spouse beneficiaries to empty the inherited IRA within ten years.⁵ Five categories of “eligible designated beneficiaries” can stretch distributions over their own life expectancy instead:⁶

A surviving spouse.
A minor child of the account owner. Once the child turns 21, the 10-year clock starts and the account must be empty by age 31.
A disabled individual, as defined by the IRS.
A chronically ill individual certified by a physician.
An individual not more than 10 years younger than the deceased.

The minor child exception applies only to the account owner’s own biological or legally adopted children. A minor grandchild, niece, or nephew named as beneficiary falls under the standard 10-year rule.¹

How the 10-Year Rule Actually Works

The full balance must be out by December 31 of the tenth year following the year of the owner’s death.¹ What you can do inside that window depends on whether the original owner had already started their own required minimum distributions.

Owner Died Before Their Required Beginning Date

If the original owner died before reaching age 73, you can take distributions in any pattern you want as long as the account hits zero by the end of year ten. Nothing for nine years and everything in year ten is allowed. Even withdrawals across the decade are allowed. The choice is a tax planning decision, not a compliance one.

Owner Died On or After Their Required Beginning Date

If the original owner was already taking RMDs at death, you must take an annual distribution in each of the ten years, calculated using IRS life expectancy tables.³ You cannot stockpile and empty it all at the end. Whatever is left after year nine still has to come out by December 31 of year ten.

The IRS waived enforcement of the annual RMD requirement inside the 10-year window for 2020 through 2024 while it finalized regulations.⁷ That relief is over. Beginning in 2025, missing an annual distribution triggers the excise tax.

Tax on What You Withdraw

Money from an inherited traditional IRA is taxed as ordinary income in the year you receive it.⁶ Because the original owner deducted the contributions, the IRS collects the deferred tax when the money finally comes out. Taking a large balance in one year can push you into a higher bracket; spreading withdrawals may keep your effective rate lower.

Contributions from an inherited Roth IRA come out tax-free, and so do the earnings if the original owner’s Roth had been open at least five years before their death.¹ If the account was younger than that, earnings are taxable when withdrawn. The 10-year depletion rule still applies to Roths even though the distributions themselves are usually tax-free.

If the deceased’s estate was large enough to owe federal estate tax, you may claim an income tax deduction for the portion of that estate tax attributable to the IRA. This is the “income in respect of a decedent” deduction, and it prevents the same dollars from being taxed at both the estate level and again as your income.⁸ It only matters for estates above the federal exemption threshold, but when it applies it can meaningfully reduce your income tax on withdrawals.

Penalty for a Missed Distribution

Missing a required distribution, whether an annual RMD inside the 10-year window or the final depletion at the end of year ten, brings a 25% excise tax on the shortfall. The tax hits the difference between what you should have withdrawn and what you actually took, not the whole account.⁹

There is a correction window. If you withdraw the missed amount within two years, the penalty drops from 25% to 10%.⁹ Both the reduced rate and the correction window came from the SECURE 2.0 Act, which also cut the old penalty from 50% to 25%.

Refusing an Inherited IRA

You’re not required to accept an inherited IRA. If the money would push you into a higher bracket or interfere with income-based benefits, you can file a qualified disclaimer and let the assets pass to the next beneficiary in line. You owe no tax on what you refuse.

The disclaimer has to meet strict requirements:¹⁰

It must be delivered in writing within nine months of the account owner’s death, or within nine months of your 21st birthday if you’re a minor.
The document must identify the IRA and be signed by you or your legal representative.
You cannot have taken any distributions or otherwise exercised control over the account first.
You cannot direct who receives the disclaimed assets; they pass under the account’s contingent beneficiary designation.

The nine-month deadline cannot be extended. If a disclaimer is even on the table, the clock is already running.

If You Inherit an Inherited IRA

When a beneficiary dies before finishing the 10-year depletion, the successor beneficiary does not get a fresh ten years. The successor steps into whatever time is left on the original schedule.¹ If the first beneficiary died in year four, the successor has six years to empty the account. If the first beneficiary was an eligible designated beneficiary using the life expectancy method, the successor moves to a 10-year window measured from that beneficiary’s death. Either way, the second generation of inheritance runs on a tighter clock than the first.

1
Internal Revenue Service. Retirement Topics – Beneficiary
2
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
3
Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
4
Internal Repository Service. Retirement Topics – Beneficiary
5
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
6
Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
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Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
8
Office of the Law Revision Counsel. 26 US Code 691 – Recipients of Income in Respect of Decedents
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Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
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eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer