If you’ve been named beneficiary of someone’s IRA, the inherited IRA rules give you a distribution timeline that has nothing to do with the schedule the original owner followed. Most non-spouse beneficiaries have to empty the account within 10 years of the owner’s death, and in some cases annual withdrawals are required during that decade as well. Traditional IRA distributions are taxed as ordinary income; Roth distributions are usually tax-free but still have to come out on schedule. Missing a required distribution triggers a 25% penalty on the shortfall.
Getting the Account Set Up Correctly
The inherited money has to go into a new account titled to show the beneficiary relationship, something like “Jane Smith as beneficiary of John Smith, deceased.” Do not merge the funds into an IRA you already own. The transfer must happen trustee-to-trustee, with one financial institution sending the money directly to another. Non-spouse beneficiaries cannot use a 60-day rollover. If a check is issued to you personally, the full amount becomes taxable income and can’t be redeposited into an inherited IRA.
Check whether the original owner had already started taking required minimum distributions and, if so, whether they finished that year’s withdrawal before dying. If they didn’t, you’re responsible for completing the year-of-death RMD, calculated on what the original owner owed for that year.1Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries This is separate from whatever schedule applies to you going forward, and it’s one of the most commonly missed obligations early on.
Options If You’re the Surviving Spouse
Spouses have flexibility no other beneficiary gets. Three paths are available, and the right one depends on your age, your cash needs, and whether your spouse was older or younger than you.
- Roll the assets into your own IRA. The money merges with your personal retirement savings and follows your own RMD schedule. You won’t owe RMDs until age 73, or 75 if you were born in 1960 or later. This gives the longest tax-deferred runway if you don’t need the funds now.2Internal Revenue Service. Retirement Topics – Beneficiary
- Keep it as an inherited IRA. You take distributions based on your life expectancy, with annual RMDs starting the year after death or the year your spouse would have turned 73, whichever comes later. This is worth considering if you’re under 59½ and might need the money, since inherited IRA withdrawals aren’t hit with the usual 10% early withdrawal penalty.2Internal Revenue Service. Retirement Topics – Beneficiary
- Disclaim the inheritance. If you’d rather the money pass to the contingent beneficiary, you can file a qualified disclaimer within nine months of the owner’s death. The disclaimer must be in writing, and you cannot have accepted any benefit from the account first.3eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer
The rollover option belongs to spouses alone. Once you take a distribution or exercise control over the account, the disclaimer option closes.
The 10-Year Rule for Everyone Else
The SECURE Act of 2019 eliminated the lifetime stretch for most non-spouse beneficiaries. If the original owner died in 2020 or later, you generally must withdraw everything within 10 years of the death.2Internal Revenue Service. Retirement Topics – Beneficiary The clock starts the year after the owner dies, and the balance must be zero by December 31 of the tenth year.
Five categories of “eligible designated beneficiaries” can still stretch distributions over their own life expectancy instead:
- A surviving spouse
- A disabled individual
- A chronically ill individual
- An individual not more than 10 years younger than the deceased
- A minor child of the deceased, until age 21
Everyone outside those categories — adult children, grandchildren, siblings, friends — is on the 10-year rule.2Internal Revenue Service. Retirement Topics – Beneficiary A minor child of the deceased shifts onto the 10-year clock when they turn 21. A grandchild who inherits goes on the 10-year rule from the start regardless of age.
If the account was left to an estate, a charity, or a trust that doesn’t qualify as a “see-through” trust, there is no designated beneficiary for distribution purposes, and the timeline is typically even shorter. Charities don’t pay income tax on the withdrawals they receive, which is why naming one directly is a clean way to move retirement money to a tax-exempt organization.
Are Annual Withdrawals Required During the 10 Years?
That depends on a single question: did the original owner die before or after their Required Beginning Date? The RBD is April 1 of the year after the year they turned 73.
If the owner died on or after the RBD, you must take annual RMDs in years one through nine and clear whatever’s left in year 10. Each annual amount is the prior year-end balance divided by the applicable factor from the IRS Single Life Expectancy Table, which decreases each year and produces gradually larger withdrawals.1Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
If the owner died before the RBD, no annual distributions are required inside the 10-year window. You could technically leave everything alone for nine years and take it all in year 10, though for tax reasons that’s rarely a good idea. Eligible designated beneficiaries using the life-expectancy stretch calculate their annual RMD the same way, just over their own life expectancy instead of a 10-year cap.
How the Money Is Taxed
Withdrawals from an inherited traditional IRA are taxed as ordinary income in the year you receive them. The distribution stacks on top of your wages and other income and can push you into a higher marginal bracket in years with a large withdrawal.
If the original owner made non-deductible contributions, the account has “basis,” and a proportional share of each distribution comes out tax-free. You’ll file IRS Form 8606 with your return in any year you take a distribution from an inherited traditional IRA with basis, or from an inherited Roth IRA where the withdrawal doesn’t qualify as tax-free. Skipping Form 8606 when required carries a $50 penalty.4Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
Inherited Roth IRAs are more generous. If the original owner first contributed to any Roth IRA at least five years before the distribution, withdrawals are generally tax-free — contributions and earnings. If the five-year window hasn’t been met, contributions still come out tax-free, but earnings may be taxable.2Internal Revenue Service. Retirement Topics – Beneficiary Watch this one closely: inherited Roth IRAs are still on the 10-year distribution rule for non-eligible designated beneficiaries. The money comes out tax-free, but it still has to come out on time.
All inherited IRA distributions, traditional or Roth, are exempt from the 10% early withdrawal penalty that normally applies before age 59½.5Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t) State income tax may also apply to traditional IRA distributions, so factor your state’s rules into the plan.
Spreading Withdrawals to Lower Your Tax Bill
If you’re on the 10-year rule and the original owner died before the RBD, you control the timing entirely. Even when annual RMDs apply, you can take more than the minimum in lower-income years to shrink what’s left for later. Roughly equal annual withdrawals tend to produce the lowest total tax bill across the decade. Divide the current balance by the number of years remaining, withdraw that, and adjust as the account grows or shrinks.
The move to avoid is waiting until year 10 and withdrawing the entire balance in a single tax year. That concentrates a decade of investment growth into one return and can easily add tens of thousands in federal tax on a moderately sized account compared to spreading the distributions out.6Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
What Missing a Deadline Costs
Missing a required distribution triggers a 25% excise tax on the shortfall — the difference between what you should have taken and what you did take. The SECURE 2.0 Act cut this from the previous 50% rate.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
The penalty drops to 10% if you correct the mistake within two years, which means taking the missed distribution and filing Form 5329 with your federal return for the year the RMD was originally due.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Even at 25%, a missed $50,000 RMD costs $12,500. Put the deadlines on a calendar and use automatic distributions if your custodian offers them.
If You Die Before Emptying the Account
Your own beneficiary — the successor beneficiary — takes over the timeline, and what they inherit depends on which category you were in. If you were an eligible designated beneficiary using the life-expectancy stretch, your successor gets a fresh 10-year period measured from your death. If you were a non-eligible beneficiary already running out the 10-year clock, your successor has to finish inside your original deadline, not a new one.2Internal Revenue Service. Retirement Topics – Beneficiary If you’re on the 10-year rule and in poor health with several years still to go, accelerating your own withdrawals can spare your heirs a compressed timeline.
When a Trust Is the Beneficiary
A trust named as beneficiary can still access the 10-year rule or the life-expectancy stretch if it qualifies as a “see-through” trust under IRS rules. A trust that doesn’t qualify is treated as having no designated beneficiary, which forces faster distributions. Qualification requires the trust to be valid under state law, irrevocable at the owner’s death, have identifiable individual beneficiaries, and have the required documentation delivered to the IRA custodian.8Internal Revenue Service. Internal Revenue Bulletin 2024-33
Even qualifying trusts have a tax problem worth knowing about. Trust income tax brackets are severely compressed: in 2026, trust income above roughly $16,000 is taxed at the top 37% federal rate.9Internal Revenue Service. 2026 Form 1041-ES If the trust accumulates distributions rather than passing them straight through to the beneficiary, the tax hit can be substantial. Anyone considering a trust as IRA beneficiary should model that cost against the asset-protection benefits with an estate attorney.
The IRD Deduction for Large-Estate Beneficiaries
If the original owner’s estate was large enough to owe federal estate tax, you may be entitled to an “income in respect of a decedent” deduction for the estate tax attributable to the IRA.10Office of the Law Revision Counsel. 26 US Code 691 – Recipients of Income in Respect of Decedents Without it, the same money would effectively be taxed twice: once in the estate and again as income when you withdraw it. You claim the deduction proportionally as you take distributions.
With the federal estate tax exemption at $15 million per person for 2026, this only applies to beneficiaries of very large estates. When it does apply, it can offset a meaningful share of the income tax on withdrawals, and a tax professional familiar with estate returns can run the calculation from the decedent’s Form 706.