Inherited IRA Rules Every Beneficiary Should Know

image of stacks of coins with small plants growing more and more on each — (Image credit: Getty Images)

Over the past few years, legislative changes and shifting regulatory guidance have altered the landscape for inherited IRAs.

Now, with the IRS' definitive final regulations governing post-death required minimum distributions (RMDs) in effect, beneficiaries face more structured (and complicated) rules.

To help you navigate these regulations and avoid penalties as you try to protect your inheritance, here are five things every IRA beneficiary should know.

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.

1. SECURE 2.0 changed Inherited IRA tax rules

SECURE 2.0 is legislation that significantly changed U.S. retirement account rules. These changes directly impact retirement savings plans, including 401(k)s, 403(b)s, IRAs, Roth accounts, and, in some cases, associated tax benefits.

For example, the minimum age for required minimum distribution (RMD) was raised to 73 under SECURE.
(Eventually, the RMD age will move to 75.)

Additionally, the SECURE Act of 2019 (the basis for SECURE 2.0) resulted in many beneficiaries not being able to extend inherited IRA distributions throughout their lifetimes. (More on that later.)

2. No more ‘stretch IRA’ strategy for many beneficiaries

Before SECURE 2.0, beneficiaries could use a "stretch" strategy with inherited IRA distributions, potentially allowing for tax-deferred growth over a more extended period.

However, a 10-year rule now applies to many beneficiaries of inherited IRAs.

Due to the original SECURE Act, most beneficiaries can no longer “stretch” distributions over their lifetimes. Instead, many non-spouse beneficiaries who inherited IRAs on or after January 1, 2020, must empty the account within 10 years of the account owner’s death.
The inherited IRA 10-year rule has raised concerns about annual RMDs for unsuspecting beneficiaries.
IRS final regulations on inherited IRAs confirm that as of 2025, many beneficiaries face annual required distributions during the 10-year period.

Eligible designated beneficiary categories

For purposes of SECURE 2.0, the following are the main categories of eligible designated beneficiaries (EDBs), who generally benefit from more flexibility in how they withdraw funds from an inherited IRA.

Surviving spouse: Can treat the inherited IRA as their own or take distributions based on their life expectancy
Minor children: Applies to children under the age of majority. Once they reach adulthood, they must follow the 10-year rule
Disabled individuals: Must meet IRS criteria for disability, being unable to engage in substantial gainful activity due to a long-term impairment
Chronically ill individuals: Those who cannot perform at least two activities of daily living without assistance or require supervision due to severe cognitive impairment
Individuals not more than 10 years younger: Typically, siblings, friends or other individual beneficiaries close in age to the account owner

Individual circumstances vary, so consult with a trusted tax adviser to determine how to time your distributions strategically while complying with the 10-year rule if it applies to you.

3. Annual withdrawals are required for some beneficiaries

Under the final IRS rules, it's not as simple for some to wait until the 10th year to withdraw all funds from the inherited IRA account.

As mentioned, for many heirs, the IRS now requires annual withdrawals to be made throughout the 10 years. (The RMD amount each year can vary based on several factors, including the beneficiary's age, relationship to the deceased, and the value of the inherited account.)

For example, rules differ depending on whether the original account owner, before they passed away, had begun taking RMDs.

If they took required distributions before they died, the beneficiary usually needs to continue taking annual distributions while complying with the 10-year rule (if applicable).

For more information, see IRS Ends Inherited IRA Confusion: Annual RMDs Required for Many Beneficiaries.

4. IRS RMD penalty rules are no longer waived

Understanding RMD rules is critical because the IRS grace period regarding those distributions has ended.

Between 2020 and 2024, the IRS waived penalties for certain beneficiaries who missed annual RMDs while it drafted final regulations.
However, with the final rules in effect as of 2025, mandatory annual distributions are now fully enforceable.

Key things to remember:

1. Inherited IRAs are generally subject to required minimum distributions.

2. Rules vary when the beneficiary qualifies as an “eligible designated beneficiary” (e.g., surviving spouses, minor children, disabled individuals, and individuals who are chronically ill).

3. RMD rules, including timing and amounts, for inherited IRAs are largely tied to the date of the original account holder’s death.

If you fail to take a required distribution, you could face an IRS penalty on the amount that should have been withdrawn.

5. Navigating inherited IRA rules: Individual details matter

With inherited IRAs, the account type, account holder, and beneficiary matter when determining tax liability and strategy.

But in many cases, determining your required distribution schedule is only the first step. Timing those distributions effectively is where tax savings can occur.

Because inherited IRA withdrawals count as ordinary income (for traditional accounts), taking uneven or late distributions can inadvertently push you into a higher income tax bracket or trigger Medicare premium surcharges.
By evaluating the account type, the owner's date of death, and your own projected earnings over the 10-year window, you can map out a multi-year withdrawal plan that may keep your overall tax liability as low as possible.

Keep in mind that this information is provided solely for educational purposes. So, consulting a financial planner or tax adviser who can tailor your financial strategy is a good first step to help ensure you preserve as much of your inherited wealth as possible.

TOPICS

Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.