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
Be a smarter, better informed investor.
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.
Related
- Inherited an IRA? Five Things Every Beneficiary Should Know
- Roth 401(k) Rule Changes for 2025
- 401(k) Early Withdrawals: New Rules for Emergencies
-
Risk Is On Again, Dow Jumps 381 Points: Stock Market TodayThe stock market started the week strong on signs the government shutdown could soon be over.
-
Does My Car Insurance Cover Rental Cars?Is it safe to decline the extra coverage car rental companies offer you when booking? Here's what you need to know.
-
New RMD Rules: Can You Pass This Retirement Distributions Tax Quiz?Quiz Take our RMD quiz to test your retirement tax knowledge. Learn about RMD rules, IRS deadlines, and tax penalties that could shrink your savings.
-
Ten Retirement Tax Plan Moves to Make Before December 31Retirement Taxes Proactively reviewing your health coverage, RMDs, and IRAs can lower retirement taxes in 2025 and 2026. Here’s how.
-
When to Hire a Tax Pro: The Age Most Americans Switch to a CPATax Tips Taxpayers may outsource their financial stress by a specific age. Find out when you should hire a tax preparer.
-
The Original Property Tax Hack: Avoiding The ‘Window Tax’Property Taxes Here’s how homeowners can challenge their home assessment and potentially reduce their property taxes — with a little lesson from history.
-
Social Security Tax Limit Rises Again: Who Pays More in 2026?Payroll Taxes The Social Security Administration has announced significant changes affecting millions as we approach a new year.
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
Trump’s 2025 Tax Bill: What’s Changing and How It Affects Your TaxesTax Law From standard deduction amounts to tax brackets and Medicaid cuts, here’s what individual filers need to know about tax changes in Trump's so called "big beautiful bill."
-
The Rubber Duck Rule of Retirement Tax PlanningRetirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think.
