Inheriting an IRA? Here’s What to Do Next

Updated: October 22, 2026

Takeaways

• Most non-spouse heirs who inherit an IRA from someone who died in 2020 or later must empty the account by December 31 of the 10th year after the year of death.
• If the original owner had already reached their required beginning date, many heirs also owe a required minimum distribution (RMD) in each of years one through nine. The IRS began enforcing those annual withdrawals in 2025.
• Surviving spouses, minor children of the owner (until age 21), disabled or chronically ill heirs, and heirs no more than 10 years younger than the owner can still stretch withdrawals over their own life expectancy.
• A missed RMD carries a 25% excise tax on the shortfall, reduced to 10% if it is corrected within the IRS correction window.
• The right pace for withdrawals depends on what your income looks like over the next decade, which is why the decision works best alongside your tax plan and the rest of your financial picture.

If you’ve inherited an IRA, the advice you’ve probably heard is to slow down. That still holds. What has changed is almost everything else. The inherited IRA rules most families learned, including the “stretch IRA” that let an heir spread withdrawals over a lifetime, ended for most beneficiaries in 2020. Today, most heirs face a 10-year deadline, and many owe withdrawals every year along the way.

The rules are only half the decision. When you take the money shapes your tax bill for a decade, and an inheritance often carries more weight than its balance suggests. Below, we cover which beneficiary category you fall into, when withdrawals are required, how different withdrawal paces play out in a hypothetical, and the questions worth answering before you move anything.

Why the old inherited IRA rules no longer apply

Before 2020, almost any individual who inherited an IRA could move it into an inherited IRA and take small annual withdrawals based on their own life expectancy. A young heir could keep most of the account growing tax-deferred for 50 years or more. That approach was called the stretch IRA, and for decades it was one of the most effective ways to pass retirement savings to the next generation.

The SECURE Act changed that for account owners who died in 2020 or later. Most non-spouse beneficiaries now have to empty the account by December 31 of the 10th year after the year the owner died. A grandchild who inherits today has ten years to draw the account down.

Two later changes matter as well. In 2024, the IRS finalized regulations confirming that some heirs under the 10-year rule must also take a distribution every year, and after several years of penalty relief, it began enforcing those annual withdrawals in 2025. SECURE 2.0 also lowered the penalty for a missed required minimum distribution from 50% to 25%.

If your plan, or your family’s, is built on what was true before 2020, it’s worth revisiting. Decisions made inside the 10-year window carry real tax consequences, and a few early mistakes can’t be reversed.

Which beneficiary are you? Your category sets the timeline

Inherited IRA rules sort heirs into categories, and your category decides how long the money can stay in the account. The custodian will ask which one applies to you, so it helps to know before the paperwork arrives.

Surviving spouses

Spouses have the most flexibility. A spouse can roll the account into their own IRA, keep it as an inherited IRA, or use a newer SECURE 2.0 election to be treated as the deceased spouse for RMD purposes. The trade-off often comes down to age. Money rolled into your own IRA can’t be withdrawn before 59½ without a 10% penalty in most cases, while withdrawals from an inherited IRA are exempt from that penalty at any age. We cover the spousal decision in more depth in Inheriting an IRA from Your Spouse.

Other eligible designated beneficiaries

A few other heirs, called eligible designated beneficiaries, can still stretch withdrawals over their own life expectancy:

• A minor child of the account owner, until age 21, when the 10-year clock starts. Grandchildren and other minors don’t qualify.
• A beneficiary who is disabled or chronically ill under IRS definitions
• A beneficiary who is not more than 10 years younger than the owner, such as a sibling or a partner close in age

Most other heirs: the inherited IRA 10-year rule

Adult children, grandchildren, nieces, nephews and friends usually land here. The account must be empty by December 31 of the 10th year after the year of death. Whether you also owe a withdrawal every year comes down to one question: had the owner reached their required beginning date?

• If the owner died before that date, there is no annual requirement. The required beginning date is April 1 of the year after the owner reaches RMD age (73 today, rising to 75 for anyone born in 1960 or later). You can take as much or as little as you like each year, as long as the account is empty by the deadline.
• If the owner died on or after that date, you owe an RMD in each of years one through nine, based on your own life expectancy, and the remaining balance must come out by the end of year ten.

Inherited Roth IRAs follow the same 10-year deadline. Because Roth owners never have a required beginning date, heirs under the 10-year rule don’t owe annual RMDs, and withdrawals are usually income-tax-free if the Roth had been open at least five years.

Estates, charities and trusts

When an IRA passes to an estate, a charity or a trust that doesn’t meet the IRS “see-through” requirements, shorter timelines can apply: five years if the owner died before their required beginning date, or the owner’s remaining life expectancy if they died after it. If a trust is named on the beneficiary form, its terms deserve a careful read with your estate attorney.

The year-of-death RMD and the penalty for a missed inherited IRA RMD

If the owner was already taking RMDs and hadn’t finished the current year’s withdrawal, that amount still has to come out, and the beneficiary is responsible for taking it. A missed RMD carries a 25% excise tax on the shortfall, reduced to 10% if the mistake is corrected within the IRS correction window, usually by the end of the second year after the miss. Each missed year counts as its own shortfall. IRS Publication 590-B has the full detail. Under the final regulations, the penalty is generally waived if the heir takes that distribution by their tax-filing deadline for the year.

Moves that are hard to undo

Some early steps close doors for good:

• Taking a check. Non-spouse beneficiaries can’t do a 60-day rollover. If the custodian pays the money to you instead of moving it directly into an inherited IRA, it becomes a taxable distribution and can’t be put back.
• Retitling the account in your own name. An inherited IRA stays titled in the deceased owner’s name for your benefit. Unless you’re a spouse electing to treat it as your own, moving it into your personal IRA can be treated as a full distribution.
• Accepting money you might want to disclaim. If you’d rather the account pass to the next contingent beneficiary, a qualified disclaimer has to be made within nine months of the death and before you accept any of the assets.

Three ways to pace a 10-year withdrawal: A hypothetical

Hypothetical example. Maya is 55 and still working when she inherits an $800,000 traditional IRA from her mother, who died at 71, before her required beginning date. Maya isn’t an eligible designated beneficiary, so the 10-year rule applies, but she has no annual RMDs. She plans to retire in six years. Assuming the account earns 6% a year, here are three ways she could pace withdrawals:

1. Wait until year 10. The account grows to about $1,432,700, and all of it becomes taxable income in a single year.
2. Take equal withdrawals. About $108,700 a year for ten years, stacked on her salary while she works and on her retirement income after.
3. Take a little now and more later. $25,000 a year for six years while her salary is high, then about $277,200 a year in years seven through ten, after her paycheck stops.

None of these is the right answer by default. Waiting keeps the most money growing tax-deferred, but it can push a large share of the inheritance into the top federal bracket in one year. Equal withdrawals are predictable, but they stack income on top of Maya’s highest-earning years. The third path tries to line up withdrawals with lower-income years, which depends on her actual retirement date and on future tax rates. Neither of those is guaranteed.

Total dollars withdrawn differ in each case because money left in the account longer has more time to grow. What matters is the after-tax result, which depends on Maya’s tax bracket and state of residence in each year. A projection built on her real brackets is what turns these options into a decision.

This is a hypothetical illustration for educational purposes only. It assumes a constant 6% annual return, which is not a prediction; actual returns will vary and may be negative. It does not reflect taxes, fees or the reinvestment of withdrawals, and it does not represent any actual client or investment.

What the spreadsheet leaves out

The 10-year math is one input among several. An inheritance lands in the middle of everything else you’re managing, and the withdrawal schedule reaches well beyond your tax return.

Larger withdrawals raise your adjusted gross income. For heirs 63 and older, that can raise Medicare premiums two years later, because the surcharge looks back at income. For parents of college-bound kids, it can shrink need-based financial aid. And if you’re considering a Roth conversion of your own, inherited IRA income competes for the same bracket space.

Then there’s the part no table captures. An inherited IRA is often one of the last financial decisions someone made with you in mind, and heirs carry that differently. Some want to leave the account untouched as long as possible, because spending it feels like losing something. Others want it settled quickly so they can grieve without a deadline in the background. Both reactions make sense, and a good plan makes room for whichever one is yours.

It also helps to name what you want the money to do. Paying down a mortgage, funding a grandchild’s education or adding margin to your own retirement each point to a different withdrawal pace. For charitably inclined heirs who are 70½ or older, qualified charitable distributions can come from an inherited IRA, counting toward an RMD without adding to taxable income.

Questions worth answering before you move the money

Before you sign the custodian’s forms, these questions are worth working through with your advisor and CPA:

1. Who exactly is named on the beneficiary form, and is a trust involved?
2. Had the owner reached their required beginning date, and did they take this year’s RMD?
3. Are you an eligible designated beneficiary? If so, does stretching withdrawals fit your plans?
4. What will your income look like in each of the next ten years? A planned retirement, or a move to a state with no income tax, can make some lower-tax years cheaper for withdrawals than others.
5. What do you want this money to do, and on what timeline?
6. Who will be your own beneficiary on the inherited account?

These questions cross into tax and estate planning at once, which is where a Personal CFO approach can help. At Brighton Jones, inherited IRA decisions sit in the same conversation as your tax projection and your estate plan. Our tax advisory team can model withdrawal schedules against your actual brackets, and your advisor can connect the result to what you want the inheritance to accomplish. For heirs who are also settling an estate, our Women’s Wealth team and our guide to what inherited documents don’t tell you cover the steps that come before and after this one.

FAQs

What is the 10-year rule for inherited IRAs?

For most non-spouse beneficiaries of owners who died in 2020 or later, the entire account must be withdrawn by December 31 of the 10th year after the year of death. If the owner had reached their required beginning date, annual RMDs are also required in years one through nine.

Do I have to take RMDs from an inherited IRA every year?

It depends on your category and when the owner died. Eligible designated beneficiaries using life expectancy payouts take annual RMDs. Heirs under the 10-year rule owe annual RMDs only if the owner died on or after their required beginning date. Inherited Roth IRAs under the 10-year rule have no annual requirement.

Is the stretch IRA still available?

Yes, for eligible designated beneficiaries, a group that includes surviving spouses and minor children of the owner until age 21. Disabled or chronically ill heirs also qualify, as do heirs no more than 10 years younger than the owner. Most adult children and grandchildren who inherit from someone who died in 2020 or later follow the 10-year rule instead.

Do I pay the 10% early withdrawal penalty on an inherited IRA?

No. Distributions from an inherited IRA are exempt from the 10% early withdrawal penalty at any age. The exception is a surviving spouse who rolls the account into their own IRA, who loses that exemption until 59½. Withdrawals from a traditional inherited IRA are still taxed as ordinary income.

What happens if I miss an inherited IRA RMD?

The IRS can impose a 25% excise tax on the amount you should have withdrawn. If you take the missed distribution and file Form 5329 within the correction window, the tax drops to 10%, and the IRS may waive it entirely when the shortfall came from reasonable error.

Standard Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Brighton Jones, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. To the extent that you have any questions regarding the applicability of any specific issue discussed above to your individual situation, you are encouraged to consult with the professional advisor of your choosing.