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 takesomething 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: the answer depends on whether the original owner had already begun required minimum distributions.

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 RMD age, which SECURE 2.0 set at 73 for those reaching it now (rising to 75 in 2033). Two cases:

• Owner died on or after the RBD (i.e., was already taking RMDs): the account was “in pay status,” so distributions must continue “at least as rapidly.” A non-eligible beneficiary takes annual RMDs based on their own life expectancy in years one through nine, then empties the account by year ten.
• Owner died before the RBD (not yet taking RMDs): 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. (An inherited Roth IRA falls here — a Roth owner is always treated as dying before the RBD — so inherited Roths follow the 10-year deadline with no required annual withdrawals.)

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 (who switches to a 10-year clock upon reaching the age of majority); 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. 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