The Inherited IRA and the 10-Year Rule

What the SECURE Act changed

Before 2020, a non-spouse who inherited an IRA could take distributions over their own life expectancy — the “stretch IRA,” which could spread the income tax across decades. The SECURE Act ended that for most beneficiaries of account owners who die after December 31, 2019. In its place came the 10-year rule: the entire inherited account must be distributed by the end of the tenth calendar year after the year of the owner’s death (IRC § 401(a)(9)(H)). Whatever is left at the end of year ten must come out — and be taxed — then.

The 2024 final-regulation twist

The open question for years was whether beneficiaries also had to take something in years one through nine, or whether they could wait and empty the account all at once in year ten. The IRS answered in final regulations issued in July 2024 (Treasury Decision 10001), effective for 2025. Most designated beneficiaries who are not eligible designated beneficiaries must fully distribute the inherited account by December 31 of the tenth calendar year after the owner’s death. If the owner died on or after the required beginning date, the final regulations generally also require annual life-expectancy distributions in years 1-9. The owner’s applicable age is birth-year specific; for a person born in 1959, the age-73 treatment reflects proposed REG-103529-23.

Because the IRS had not enforced the annual-RMD requirement while the rules were unsettled, it waived the penalty for missed distributions in 2021 through 2024. That relief has ended: the annual RMDs are required beginning in 2025, and the penalty for missing one now applies.

Before vs. after the required beginning date

The pivot is the owner’s required beginning date (RBD) — broadly, April 1 of the year after they reach the applicable RMD age. That age is birth-year specific: generally age 73 for a person born in 1951 through 1959 and age 75 for a person born in 1960 or later; for a person born in 1959, the age-73 treatment reflects proposed Treasury regulations under REG-103529-23. Two cases:

• Owner died on or after the RBD (i.e., on or after the required beginning date): the account was “in pay status,” so distributions must continue “at least as rapidly.” A non-eligible beneficiary generally takes annual life-expectancy distributions in years one through nine — the exact measuring life depends on the beneficiary category, the account type, and whether separate accounts were established — then empties the account by year ten.
• Owner died before the RBD (i.e., before the required beginning date): no annual distributions are required; the beneficiary can withdraw on any schedule they like, as long as the account is empty by the end of year ten. (For post-death RMD purposes, a Roth IRA owner is treated as dying before the required beginning date, so an ordinary designated beneficiary generally has no annual RMDs in years one through nine but must empty the inherited Roth IRA by the end of year ten; tax-free treatment remains subject to IRC § 408A’s qualified-distribution rules.)

Who is exempt: eligible designated beneficiaries

The 10-year rule does not apply to eligible designated beneficiaries (EDBs), who may still stretch distributions over life expectancy (IRC § 401(a)(9)(E)): a surviving spouse; a minor child of the account owner (an eligible designated beneficiary until age 21, then on a 10-year clock); a disabled individual; a chronically ill individual; and any beneficiary not more than ten years younger than the owner. Note that a grandchild is generally not an EDB (only the owner’s own minor child qualifies), so grandchildren typically land on the 10-year rule. For multiple beneficiaries, full separate-account treatment generally requires separate accounts satisfying Treas. Reg. § 1.401(a)(9)-8(a) to be established by the end of the calendar year following the year of death; a later division does not retroactively produce full separate-account treatment. The full comparison is on the spouse-vs-non-spouse page.

What it means for planning

The practical effect is bracket compression. Forcing a large traditional account out over ten years — often during a beneficiary’s peak earning years — can stack that income on top of their salary and push it into higher brackets. That has raised the value of steps taken during the owner’s life: partial Roth conversions to pre-pay tax at a known rate, careful choice of which beneficiary receives which account, and coordinating withdrawals with the beneficiary’s own income. Naming a trust as beneficiary adds another layer of rules and is its own careful decision. None of these is one-size-fits-all — they depend on the numbers.

Sources & methodology