When you die, your IRA passes directly to whoever you named on the beneficiary form your custodian has on file. That transfer happens outside your will and outside probate, which means the form controls even if your will says something different. What happens next to your IRA when you die depends almost entirely on who inherits it: a surviving spouse has the most options, most other heirs must empty the account within ten years, and a small group can stretch withdrawals over their own lifetimes. The tax bill can be substantial, especially for a traditional IRA that lands on top of the heir’s regular income.
The Beneficiary Form Controls Everything
An IRA is a contract between you and a financial custodian, and the beneficiary designation on that contract overrides your will, your trust, and the rest of your estate plan. If you named your brother on the form ten years ago and your will leaves everything to your spouse, your brother gets the IRA. Reviewing the form after every major life change is the single most important thing you can do for the account.
The form lets you name a primary beneficiary and one or more contingent beneficiaries. If the primary dies before you, the money passes to the contingent. If every designation fails, or you never filed a form, most custodial agreements default the account into your estate. Two problems follow. The IRA enters probate and becomes exposed to creditor claims, and the distribution window compresses: when an estate rather than an individual inherits, the entire balance generally must be withdrawn within five years if you died before your required beginning date for distributions.
What a Surviving Spouse Can Do
A surviving spouse gets options no one else has. The most powerful is the spousal rollover, which treats the inherited IRA as the spouse’s own account. Future contributions are allowed, and required minimum distributions wait until the surviving spouse reaches their own RMD age, which is 73 for people born between 1951 and 1959 and 75 for those born in 1960 or later.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs This keeps the balance growing tax-deferred and is usually the right choice when the surviving spouse doesn’t need the money right away.
A spousal rollover can backfire for a spouse under age 59½. Withdrawals from the spouse’s own IRA before that age trigger a 10% early withdrawal penalty. Opening an inherited IRA instead avoids that penalty entirely, regardless of the spouse’s age, which is the better route when the money is needed for living expenses.2Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)
Starting in 2024, SECURE Act 2.0 added a third path. A surviving spouse who is the sole beneficiary can elect to be treated as the deceased spouse for RMD purposes.3Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans This helps when the deceased spouse was younger, because RMDs get calculated using the younger age and produce smaller required withdrawals. It also avoids the 10% early withdrawal penalty tied to a full rollover. The election should generally be made by the end of the year following the owner’s death, though timing details vary by custodian.
The Ten-Year Rule for Most Other Heirs
Most non-spouse beneficiaries who inherited an IRA after 2019 must empty the account by December 31 of the tenth year following the original owner’s death.4Internal Revenue Service. Retirement Topics – Beneficiary This is the default for adult children, siblings, friends, and any other designated beneficiary who doesn’t qualify for an exception.
The catch is that the ten-year window doesn’t always mean the heir can wait until year ten and take one lump sum. If the original owner died on or after their required beginning date for RMDs, the beneficiary must take annual minimum distributions in each of the first nine years, then withdraw whatever remains by the end of year ten.5Internal Revenue Service. Notice 2024-35, Certain Required Minimum Distributions for 2024 If the owner died before that date, the heir has more freedom to time withdrawals inside the ten-year window.
The practical difference is large. A beneficiary who can choose when to withdraw during the decade can push distributions into lower-income years and cut the total tax. A beneficiary locked into annual minimums has less room to maneuver. Either way, the account has to be empty at the end of year ten.
The Narrow Exceptions: Eligible Designated Beneficiaries
A small group of heirs escapes the ten-year clock and can stretch distributions across their own life expectancy. The IRS calls them eligible designated beneficiaries, and only five categories qualify:6Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
- A surviving spouse, covered above.
- A minor child of the account owner. The child uses life-expectancy distributions until reaching age 21, at which point the ten-year clock starts. This applies only to the owner’s own children, not grandchildren, nieces, or nephews.
- A disabled individual, meaning someone unable to engage in any substantial gainful activity due to a physical or mental impairment expected to result in death or last indefinitely.7Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
- A chronically ill individual, generally someone certified by a licensed health care practitioner as unable to perform at least two activities of daily living for at least 90 days, or who requires substantial supervision due to cognitive impairment.
- An individual not more than ten years younger than the deceased owner. A close-age sibling or an unmarried partner often fits here.
Life-expectancy heirs must take annual distributions, but the withdrawal timeline stretches across decades instead of ten years. When one of these beneficiaries later dies, the successor inherits whatever remains and gets a fresh ten-year window to empty the account.4Internal Revenue Service. Retirement Topics – Beneficiary None of these beneficiaries can roll inherited funds into their own existing IRA. The account must remain titled as an inherited IRA.
What Your Heirs Will Owe in Tax
Traditional IRAs
Every dollar withdrawn from an inherited traditional IRA counts as ordinary income at the beneficiary’s marginal rate.8Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts For 2026, federal income tax rates run from 10% to 37%.9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 A large inherited IRA can push the heir into a higher bracket if too much comes out in a single year. Someone who normally earns $90,000 and withdraws $200,000 from an inherited IRA in one year will pay tax on the combined $290,000 at progressively higher rates. Spreading withdrawals across several years, when the rules allow it, is the most effective way to reduce the overall tax bill.
One relief: inherited IRA distributions never carry the 10% early withdrawal penalty, no matter the beneficiary’s age. That applies to both traditional and Roth inherited accounts. The full distribution still gets reported on the heir’s Form 1040 for the year received.10Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions (Withdrawals)
Roth IRAs
Inherited Roth IRAs follow the same distribution timelines as traditional IRAs. The ten-year rule, the eligible designated beneficiary exceptions, and the successor rules all apply the same way.4Internal Revenue Service. Retirement Topics – Beneficiary The tax treatment is different. Qualified distributions from an inherited Roth are fully tax-free, provided the account met the five-year aging rule before the owner’s death. The five-year clock runs from the year the original owner first contributed to any Roth IRA, not from the date the heir inherited it.
If the five-year rule wasn’t met, earnings withdrawn are taxable, though contributions still come out tax-free. Because Roth owners never face RMDs during their lifetime, they always die “before their required beginning date” for IRS purposes. That means Roth heirs owe no annual minimum distributions during the ten-year window. They only need to empty the account by the end of year ten, which gives them the maximum runway to let the money keep growing tax-free.
Federal Estate Tax
Your IRA balance is included in your gross estate for federal estate tax. For 2026 the exemption is $15,000,000 per individual, so the vast majority of estates owe nothing.11Internal Revenue Service. What’s New – Estate and Gift Tax Above that threshold, the same IRA can be taxed twice, once inside the estate and again as income when the beneficiary withdraws. The tax code offers partial relief through a deduction for income in respect of a decedent, which lets the beneficiary deduct a portion of the estate tax actually paid on the IRA.12eCFR. 26 CFR 1.691(c)-1 – Deduction for Estate Tax Attributable to Income in Respect of a Decedent If your estate is large enough to owe federal estate tax, a tax professional pays for themselves on this calculation.
Naming a Trust as Beneficiary
Some owners name a trust rather than an individual, usually to keep control over how and when the money reaches the intended person. Trusts come up most often when the beneficiary is a minor, has a disability, struggles with money management, or when the owner is in a later marriage and wants funds protected for children from a prior relationship.
A trust can’t be a designated beneficiary on its own, but the IRS will look through the trust and treat its individual beneficiaries as the designated beneficiaries if four conditions are met: the trust is valid under state law, it’s irrevocable or becomes irrevocable at the owner’s death, the trust beneficiaries are identifiable from the document, and the required documentation is provided to the IRA custodian.6Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) If any condition fails, the IRS treats the IRA as having no designated beneficiary and the distribution timeline accelerates. A trust also hits the top tax bracket at far lower income levels than individuals, which matters if distributions accumulate inside the trust rather than passing through to the beneficiary.
What a Missed Distribution Costs
The IRS charges a 25% excise tax on any amount an heir should have withdrawn but didn’t.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs If the shortfall is caught and corrected within two years, the penalty drops to 10%. The beneficiary reports it on Form 5329 with their federal return for the year the distribution was due. The penalty applies to any missed annual RMD during the ten-year period, to a failure to empty the account by the end of year ten, and to eligible designated beneficiaries who skip their annual life-expectancy withdrawal. Stacked on top of the income tax already owed on the money, a missed distribution can easily cost a third or more of the amount involved.
How Your Heir Actually Claims the Money
The process starts with paperwork. Your heir will need your full legal name, Social Security number, and the IRA account number, plus a certified copy of the death certificate. Most custodians require an original with a raised seal rather than a photocopy. They then contact the financial institution holding the IRA and request its beneficiary claim form, sometimes called a Beneficiary Distribution Election Form.
On that form, the heir picks how to handle the account: open a new inherited IRA, roll it into their own IRA (spouses only), or liquidate and take cash. Identifying and tax information goes on the same form. Most custodians accept submissions through a secure portal, though some still require physical mail. Once the paperwork clears, the custodian retitles the account or transfers the assets, usually within two to four weeks. After that, the inherited IRA belongs to the beneficiary to manage inside whichever distribution rules apply to their category.