What Happens When You Inherit an IRA: Rules, Taxes, and Deadlines

When you inherit an IRA, the account passes to you directly from the custodian without going through probate, but what you can do with it and what you’ll owe in tax depends almost entirely on your relationship to the person who died. Surviving spouses have the widest set of choices, including treating the account as their own. Most other heirs must empty the account within 10 years. A small group of non-spouse beneficiaries can still spread withdrawals over their lifetime. The type of IRA (traditional or Roth) and whether the owner had already started required minimum distributions decide the rest.

Your First Steps With the Custodian

Before you decide anything about distributions, you have to claim the account. Contact the financial institution holding the IRA and ask for its beneficiary claim packet. You will need:

A certified copy of the death certificate. Order several from the local vital records office, since other institutions settling the estate will also want copies. Fees typically run from $5 to $30 per copy.
The decedent’s full legal name, Social Security number, and IRA account number.
Your own government-issued photo ID.
The custodian’s beneficiary claim form, which asks about your relationship to the deceased and your chosen distribution method.

Once you submit everything, the custodian either retitles the account in your name as beneficiary or liquidates it, depending on what you elected. Online portals can process a claim in a few business days; paper submissions take longer. For each year you take money out, the custodian sends you a Form 1099-R and files a copy with the IRS, so the withdrawal has to appear on your Form 1040.¹²

If You Inherited From Your Spouse

Federal law treats a surviving spouse differently from every other beneficiary, which is what opens up the options below.³

Treat the IRA as Your Own

The most common choice is to make the inherited IRA your own account. You can do this by contributing to it, or simply by not taking any beneficiary distributions. From that point on, the account follows the ordinary rules for an IRA you opened yourself, including the ability to wait until age 73 to begin required minimum distributions.⁴

Roll It Into Your Own IRA

You can also move the funds into an existing IRA or a new one you open for that purpose. A direct trustee-to-trustee transfer is the cleanest route. If you take a distribution and redeposit it yourself, you have 60 days to complete the rollover or the amount becomes taxable.³

Keep It as an Inherited IRA

If you are under 59½ and think you may need the money, keeping the account titled as inherited has one big advantage: withdrawals are not subject to the 10 percent early-distribution penalty that normally applies before that age. Distributions are taken over your own life expectancy.⁵

Take the Money in a Lump Sum

You can withdraw the whole balance at once. From a traditional IRA that means the full amount hits your income for the year and can push you into a much higher bracket. From a Roth IRA that has satisfied the five-year holding requirement, a lump sum is tax-free.

Disclaim the Inheritance

If you don’t want the account and would rather it pass to the contingent beneficiary (often your children), you can file a qualified disclaimer. It has to be in writing, delivered within nine months of the death, and you cannot have accepted any benefit from the account first.⁶ The IRA then passes as if you had died before the owner.

If You Inherited From Anyone Else: The 10-Year Rule

Most adult children, siblings, friends, and other named individuals fall into what the IRS calls “designated beneficiaries.” If that’s you, you must have the entire account emptied by December 31 of the tenth year after the owner’s death.⁵

How you space out those withdrawals is largely up to you, with one important exception. If the original owner had already reached their required beginning date for minimum distributions (age 73 for most people), you have to take at least an annual minimum in each of years one through nine, calculated on your own life expectancy, and then clear the balance in year 10. If the owner died before that age, no annual minimum applies and you only need to meet the 10-year deadline.²

Inherited Roth IRAs are also on a 10-year clock. Because Roth owners never had to take lifetime required distributions in the first place, the “died before the required beginning date” branch effectively always applies. You have no annual minimum from a Roth: just empty it by the end of year 10.⁷

If the account had no named beneficiary, or the beneficiary was the estate, a charity, or certain trusts, the timeline shortens. The whole balance generally has to come out within five years of the death when the owner had not yet begun required distributions.

The Narrow Group That Can Still Stretch Withdrawals

A handful of non-spouse heirs, called eligible designated beneficiaries, can still take distributions over their own life expectancy instead of using the 10-year rule:

Minor children of the account owner. Only the owner’s own children qualify, not grandchildren, nieces, or nephews. The stretch runs until the child reaches age 21, at which point a 10-year clock starts on whatever is left.
Disabled individuals, where a physician has certified that you cannot perform any substantial gainful activity because of a physical or mental condition expected to result in death or last indefinitely.²
Chronically ill individuals, certified within the past 12 months by a licensed health care practitioner as unable to perform at least two activities of daily living without substantial assistance for at least 90 days, or as needing substantial supervision because of severe cognitive impairment.⁸
Beneficiaries who are not more than 10 years younger than the owner, which often covers siblings or partners close in age.⁵

When an eligible designated beneficiary later dies, or a minor child hits 21, the remaining balance has to be distributed within 10 years of that event.

What You’ll Owe in Tax

Traditional IRA

Every dollar you pull from an inherited traditional IRA is ordinary income taxed at your federal rate.² If the original owner made any nondeductible (after-tax) contributions, the portion of each withdrawal attributable to those isn’t taxed again, but earnings and pre-tax contributions are. These distributions count as income in respect of a decedent: the tax the owner deferred during life now falls on you.

If the estate was large enough to owe federal estate tax and the IRA was part of that taxable estate, you may be able to claim an income tax deduction (sometimes called the IRD deduction) for the share of estate tax attributable to the IRA, which keeps the same dollars from being taxed twice.

Roth IRA

Distributions from an inherited Roth IRA are tax-free once the account has met the five-year holding requirement. The clock starts on January 1 of the first year the owner made any Roth contribution, not the date you inherited.² If the Roth was opened less than five years before the owner died, you can still take the original contributions out tax-free, but earnings may be taxable until the five-year mark passes.

State Tax

Federal income tax is only part of the picture. A handful of states impose their own inheritance tax, and rates depend on your relationship to the deceased: spouses are typically exempt, while more distant relatives can face rates as high as 16 percent. Most states also tax traditional IRA distributions as ordinary state income. A few have no income tax at all. Check the rules where you live, because state tax can affect how you want to time withdrawals across the 10-year window.

If You Live Outside the United States

If you are a non-resident alien inheriting a U.S. IRA, the custodian must generally withhold 30 percent of each distribution for federal income tax. A tax treaty between your country of residence and the United States can lower that rate, but only if you give the custodian a valid Form W-8BEN.⁹

What Happens if You Miss a Deadline

Failing to take a required amount in any given year triggers an excise tax of 25 percent on the shortfall, meaning the difference between what you should have taken and what you actually took.⁴ Correct the miss within two years and the penalty drops to 10 percent. The same excise tax applies to any balance still sitting in the account after the 10-year deadline: whatever’s left is treated as an amount that should have been distributed and wasn’t.

If You Inherited From Someone Who Also Inherited

When the person who inherited the IRA dies before emptying it, the balance passes to their named beneficiary, called a successor beneficiary. A successor does not automatically get a fresh 10-year window. The remaining balance generally has to be distributed within 10 years of the first beneficiary’s death, running from that date if the first beneficiary was an eligible designated beneficiary taking life-expectancy payments (or, for a minor child, from the date the child turned 21).² Successor beneficiaries cannot use their own life expectancy and cannot qualify as eligible designated beneficiaries, no matter their personal circumstances.

1
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
2
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
3
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts
4
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
5
Internal Revenue Service. Retirement Topics – Beneficiary
6
eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer
7
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
8
Office of the Law Revision Counsel. 26 USC 7702B – Treatment of Qualified Long-Term Care Insurance
9
Internal Revenue Service. Plan Distributions to Foreign Persons Require Withholding