Ask the Editor, July 4: Tax Questions on 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 questions on inherited IRAs. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. 10-Year Cleanout Rule

Question: I just inherited a traditional IRA from my aunt. I heard there is a 10-year distribution rule. How does this work?

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 legislation curtailed the break for most non-spousal beneficiaries.

For most non-spousal 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 February 2025, 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.

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If an IRA owner dies before his or her beginning RMD date, and the beneficiary is subject to the 10-year cleanout 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 own life expectancy, so the younger the beneficiary, the smaller the yearly RMD amounts.

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 2021-2024. They needn’t make up for the missed distribution. But they must take an RMD starting in 2025.

2. Inherited Roth IRA

Question: How does the 10-year rule for inherited IRAs apply to inherited Roth IRAs?

Joy Taylor: Similar to the rules for traditional IRAs, many nonspousal 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.

3. IRA Inherited Before 2020

Question: I inherited a traditional IRA from my mom in 2017. Does the 10-year cleanout rule apply to me?

Joy Taylor: No. The 10-year cleanout rule applies only to IRAs inherited after 2019, meaning the original IRA owner died in 2020 or later. So you can still do a “stretch IRA,” meaning you can stretch RMDs over your lifetime.

4. IRA Inherited by a Surviving Spouse

Question: In 2022, a 40-year-old woman inherited her late husband’s IRA when he died at age 52. She elected to treat the IRA as an inherited IRA, rather than treating it as her own IRA. Is the surviving spouse subject to the 10-year cleanout rule?

Joy Taylor: It is my understanding that a surviving spouse who elects to treat an IRA as an inherited IRA would not be required to use the 10-year rule to deplete the account. So the woman can stretch RMDs over her lifetime.

5. IRA Beneficiary is Older than the Deceased Owner

Question: A 52-year-old woman passed away in early 2025 and left her traditional IRA to her 54-year-old brother. Does he have to liquidate the IRA within 10 years? Also, can he make withdrawals from the IRA before he turns 59½ without having to pay the 10% early-withdrawal penalty?

Joy Taylor: The 10-year cleanout rule on inherited IRAs doesn’t apply in this case. That’s because the beneficiary was not more than 10 years younger than his sister. So he is considered an eligible designated beneficiary and can stretch annual distributions over his lifetime. He will be subject to regular income tax on the withdrawals, but he won’t have to pay the 10% penalty on pre-age-59½ distributions.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter and The Kiplinger Letter can ask Joy questions about tax topics. You'll find full details of how to submit questions in The Kiplinger Tax Letter and The Kiplinger Letter. (Subscribe to The Kiplinger Tax Letter or The Kiplinger Letter.)

We have already received many questions from readers on topics related to IRS online accounts, tax credits for buying an electric vehicle and more. We’ll answer some of these in a future Ask the Editor round-up. So keep those questions coming!

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