Ask the Tax Editor: 10-Year Rule for Inherited IRAs

Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at five questions on inherited IRAs and the 10-year cleanout rule for non-spousal inherited IRAs. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. 10-year cleanout rule for inherited IRAs

Question: Last year, I inherited a traditional IRA from my 89-year-old father. Do I have to withdraw all the money within 10 years or can I take distributions over my lifetime?

Joy Taylor: Before 2020, deceased owners of IRAs could leave their accounts to their children, grandchildren or other individual beneficiaries, and those heirs could stretch required minimum distributions (RMDs) from inherited traditional IRAs over their own lifetimes, thus allowing the funds in the accounts to grow tax-free for decades. Congress saw this as a loophole for the rich and, in the 2019 SECURE Act, curtailed the break for most nonspousal beneficiaries.

For most nonspousal IRAs inherited after 2019, the IRA funds must be distributed to the beneficiary within 10 years of the owner’s death. So, if an IRA owner dies in 2025, as is your case, the beneficiary must clean out the IRA no later than December 31, 2035. There are exceptions for beneficiaries who are surviving spouses or minor children (until age 21) of the account owner, chronically ill or disabled, or not more than 10 years younger than the deceased IRA owner.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

If an IRA owner dies before his or her beginning RMD date, and the beneficiary is subject to the 10-year clean-out rule, the beneficiary needn’t take a minimum distribution each year. The beneficiary can immediately cash out, opt to wait until year 10 to get the money, get yearly distributions, or skip years, provided the IRA is fully depleted by the end of the 10-year period.

If an IRA owner dies on or after his or her RMD start date, then the beneficiary must withdraw, at a minimum, annual RMDs from the inherited IRA during the 10-year period, generally beginning with the year after the original owner died, and then fully deplete the IRA by year 10 at the latest. In this situation, the beneficiary generally figures annual RMDs based on his or her life expectancy, so the younger the beneficiary, the smaller the yearly RMD amounts.

Since your father died in 2025 at 89 years old, he would have been taking annual RMDs from his IRA. As such, you will also have to begin taking annual RMDs from the inherited IRA beginning this year, based on your life expectancy. You will also have to deplete the IRA by December 31, 2035, at the latest. Note that you can withdraw more than your annual RMD in any given year, but you can't withdraw less.

There is relief if the IRA owner died in 2020, 2021, 2022 or 2023. Beneficiaries of IRAs in which the original owner was already subject to RMDs won’t be penalized for not taking distributions in 2021-24. They needn’t make up for the missed distribution. But they must take an RMD starting in 2025. This relief wouldn't apply to you because your father died in 2025.

2. Beneficiary not more than 10 years younger than the deceased

Question: My sister died earlier this year at age 55, and I am the sole beneficiary of her traditional IRA. I am 50 years old. How does the 10-year clean-out rule for inherited IRAs apply to me?

Joy Taylor: You don't have to worry about the 10-year cleanout rule. Because you are not more than 10 years younger than your deceased sister, you are considered an "eligible designated beneficiary" under the inherited IRA rules. So you can stretch annual RMDs from the inherited IRA over your lifetime beginning in 2027, the year after your sister died.

In your case, you would figure your annual RMD based on your life expectancy. You would use Table I of Appendix B in IRS Publication 590-B for this calculation.

3. Decedent's final RMD from a traditional IRA

Question: My 82-year-old sister died earlier this year, and I am the sole beneficiary of her traditional IRA. The IRA custodian told me that she didn't take her full RMD for 2026 before she died, and I have to withdraw the remaining RMD for 2026. Is this true?

Joy Taylor: Yes. If an owner of a traditional IRA dies before taking all of his or her RMD for the year, the amount must still be withdrawn from the account. This distribution is generally paid to the beneficiary, and not to the deceased owner or his or her estate. The beneficiary is taxed on the distributed amount. The year-of-death RMD is figured using Table II or III in Appendix B of IRS Publication 590-B, based on the decedent's life expectancy and as if he or she lived for the entire year.

It used to be that that the IRA beneficiary had until December 31 of the original IRA owner's year of death to take that final RMD for the deceased owner. But the IRS has relaxed the rules to give the beneficiary more time to withdraw the decedent's final RMD. According to the IRS, the beneficiary must take the decedent's final RMD by the later of (1) the tax return deadline for the beneficiary's income tax return for the year of the decedent's death or (2) December 31 of the year following the year the decedent died. So in your case, you would have until December 31, 2027, to withdraw your deceased sister's final RMD for 2026.

4. Qualified charitable distribution from an inherited IRA

Question: I am 76, and I inherited a traditional IRA from my 84-year-old sister last year. Can I do a qualified charitable distribution (QCD) from my inherited IRA?

Joy Taylor: Yes. People age 70½ and older can transfer up to $111,000 in 2026 from a traditional IRA directly to charity. QCDs can be done only from an IRA, either one that you own or an inherited IRA. You can’t do them from a 401(k) or other workplace retirement plan.

QCDs are nontaxable and aren't included in your adjusted gross income (AGI). And they can count toward your RMD, thus reducing the taxable amount of the RMD, provided you do the QCD before withdrawing your full RMD for the year.

5. 10-year clean-out rule for inherited Roth IRAs

Question: Are nonspousal inherited Roth IRAs subject to the 10-year clean-out rule?

Joy Taylor: Yes. Similar to the rules for traditional IRAs, many non-spousal beneficiaries of Roth IRAs inherited after 2019 must clean out the account by the end of the 10th year after the owner’s death. But the money is tax-free to them. Also, because Roth IRA owners are not required to take annual RMDs, beneficiaries of inherited Roth IRAs needn’t worry about whether the original account owner died before or after the starting date for taking RMDs. These beneficiaries can opt to clean out the account in year 1, wait until year 10 to take out all the Roth IRA funds, skip years or get annual distributions, provided they fully deplete the Roth IRA within the 10-year period.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Disclaimer

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.