New IRS Inherited IRA Rules: Annual RMDs Required for Many Beneficiaries

rendering of a wooden box with a yellow check mark inside

(Image credit: Getty Images)

In long-awaited final rules, the IRS finally clarified the controversial 10-year rule for inherited individual retirement accounts (IRAs). The guidance, set to take effect this year, addresses a key question that has puzzled many advisors and beneficiaries since the passage of the original SECURE Act more than five years ago.

Here's more of what you should know.

New rules for inherited IRAs

A big question, now answered, had been whether non-spouse beneficiaries had to take annual required minimum distributions (RMDs) during the 10 years following the original account holder's death, or if they could wait and withdraw the entire amount at the end of the decade.

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.

In the final rules, the IRS confirms that most beneficiaries must take annual RMDs throughout the 10 years, with the account fully depleted by the end of the tenth year.

This applies specifically to cases where the original account holder had already started taking RMDs before they passed away.

Exceptions to the rules

However, the regulations do provide some flexibility regarding annual distributions.

If the original account holder passed away before reaching their RMD age, beneficiaries have more leeway in timing their withdrawals within the 10-year window.
But the account must still be emptied by the end of the 10 years.

It's also important to note that rules vary for certain beneficiaries. For example, the following "eligible designated beneficiaries" are generally exempt from the 10-year rule:

Surviving spouses
Minor children (under age 21)
Disabled or chronically ill individuals
Beneficiaries not more than 10 years younger than the deceased

Penalty relief for missed RMDs

While the regulations were finalized last year, they are supposed to take effect this year, 2025. However, for those subject to the new rules, the IRS knows the transition has been confusing and has provided a grace period. As Kiplinger reported, for 2021 through 2024, affected beneficiaries didn't have to take RMDs.

For more information, see IRS Delays IRA RMDs.

Inherited IRA: Bottom Line

For many beneficiaries of inherited IRAs, the era of stretching withdrawals over a lifetime is essentially over. As a result, if you are a beneficiary subject to the annual RMD rule, plan how to manage inherited IRA funds over a shorter timeframe, balancing tax implications with your financial needs and goals.

Stay informed and adjust your financial planning accordingly if you are a current retirement account holder or potential beneficiary. Also, given the complexity of these changes, it’s a good idea to consult with a trusted financial advisor or tax professional to help review your estate and tax plans and beneficiary designations.

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 covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and income tax brackets. Her award‑winning work has been featured in numerous national and specialty publications.