I Just Inherited an IRA — Now What? The 10-Year Rule, Explained

If you've just inherited an IRA, here's the headline most people miss: thanks to the SECURE Act 10-year rule, you almost certainly do not get to "stretch" those distributions across your lifetime the way your parents' generation could. For most non-spouse beneficiaries, the entire inherited IRA must be drained by December 31 of the 10th year after the original owner's death — and depending on the decedent's age, you may also owe an annual required minimum distribution (RMD) each year along the way.

That sounds simple. It is not. The 10-year rule has more carve-outs, edge cases, and tax landmines than almost any other provision in the retirement code, and 2025 was the first year the IRS actually began enforcing the annual RMD piece after four years of penalty relief. If you inherited a six- or seven-figure IRA from a parent who died in 2020 or later, the choices you make in the next 90 days could cost — or save — tens of thousands of dollars in federal tax.

Here's what the rule actually says, who gets exceptions, how Roth IRAs are treated differently, and the planning moves to consider before the calendar does the deciding for you.

What the 10-Year Rule Actually Says

The 10-year rule is the centerpiece of how the SECURE Act of 2019 rewrote inherited IRA distributions. For any IRA owner who died on or after January 1, 2020, most non-spouse beneficiaries no longer get to use the old "stretch IRA" — taking small required distributions over their own life expectancy and letting the bulk of the account compound tax-deferred for decades.

Instead, the inherited account must be completely emptied by the end of the 10th calendar year after the year of death. If your father died in 2024, the account must be at zero by December 31, 2034.

The IRS issued final regulations in July 2024 clarifying the mechanics, and after several years of penalty relief, the rules took full effect for distributions starting in 2025.

The Two Buckets: EDBs vs. Everyone Else

Whether the 10-year rule applies to you depends on which of two beneficiary categories you fall into.

Eligible Designated Beneficiaries (EDBs)

EDBs are the exception class. They can usually still use the old life-expectancy stretch instead of the 10-year window. There are exactly five EDB categories:

1. The surviving spouse of the IRA owner.
2. A minor child of the decedent (not a grandchild, niece, or stepchild). The stretch lasts only until the child reaches the age of majority — at that point, a 10-year countdown starts.
3. A disabled beneficiary, as defined under IRS rules.
4. A chronically ill beneficiary, as defined under IRS rules (requires certification).
5. An individual not more than 10 years younger than the decedent — often a sibling, partner, or close-in-age friend.

If you fit one of those five buckets, the 10-year rule generally doesn't apply to you — you can take life-expectancy RMDs across what's typically a much longer horizon.

Non-Eligible Designated Beneficiaries

Everyone else — most commonly adult children, grandchildren, nieces and nephews, and friends — is a non-eligible designated beneficiary, and the 10-year rule applies in full force.

This is where the vast majority of high-net-worth families land. If you're a 55-year-old executive inheriting a $2 million IRA from a parent who died at 80, you are in this bucket, and the rule is going to drive your tax planning for the next decade.

The Annual RMD Trap (This Is the New Part)

Here's the part of the 10-year rule that confused everyone — including the IRS — for nearly five years: do you have to take an RMD every year inside the 10-year window, or can you let it ride and take one big distribution in year 10?

The final regulations settled it. The answer depends on whether the original IRA owner had already reached their Required Beginning Date (RBD) when they died.

The RBD is April 1 of the year after the owner turned their RMD age — currently 73 under SECURE 2.0 (rising to 75 in 2033 for those born in 1960 or later).

• If the decedent died before their RBD: You only need to make sure the account is empty by December 31 of year 10. No annual RMD requirement in years 1–9. Total distribution flexibility.
• If the decedent died on or after their RBD: You must take an annual RMD in each of years 1 through 9 and fully empty the account by the end of year 10. You can't punt to the last year.

The IRS waived penalties for missed annual RMDs from 2021 through 2024 while everyone waited for the final regs. That waiver is over. 2025 was the first enforcement year, and the penalty for a missed RMD is a 25% excise tax on the shortfall (potentially reduced to 10% if you correct it within the IRS's "correction window" and file Form 5329).

If a parent who was already taking RMDs died any time from 2020 to 2024, and you've been sitting on an inherited IRA without taking annual distributions, this is the year to talk to a planner. The math gets ugly fast.

How Inherited Roth IRAs Are Different

Inherited Roth IRAs are subject to the same 10-year clean-out deadline as traditional IRAs. The Roth shelter doesn't exempt you from emptying the account.

But two things are different — both in your favor.

First, qualified distributions from an inherited Roth are tax-free, assuming the original owner satisfied the 5-year holding requirement before death. That changes the planning calculus completely: there's no reason to spread distributions to manage tax brackets if the distributions aren't taxable anyway. The main reason to delay is to maximize tax-free compounding inside the inherited account.

Second, because Roth IRA owners are not subject to lifetime RMDs (Roth IRA owners have no RBD during life), inherited Roth IRAs under the 10-year rule are treated as if the owner died before their RBD. That means no annual RMDs in years 1–9, regardless of the decedent's age at death. You can let the account compound tax-free for nine and a half years and then take one big tax-free distribution at the deadline.

For most non-spouse Roth beneficiaries, the optimal strategy is exactly that: leave it alone, let it grow tax-free, and pull it at the end. The math almost always favors maximum deferral when the distributions are tax-free anyway.

(For more on the broader Roth question, see our breakdown of Traditional 401(k) vs Roth 401(k).)

What Spouses Should Know

Surviving spouses get the best deal in the inherited IRA system, and they actually have multiple options — not just one default treatment.

A surviving spouse can:

• Treat the IRA as their own by rolling it into their existing IRA or retitling it. This is usually the best move if the spouse is under 59½ and won't need the money soon, or if they're younger than the decedent and want to delay RMDs as long as possible.
• Remain the named beneficiary and keep it as an inherited IRA, taking distributions based on their own life expectancy. This is often the right move if the surviving spouse is under 59½ and does need access to the funds — distributions from an inherited IRA aren't subject to the 10% early withdrawal penalty.
• Elect the 10-year rule, though this is rarely optimal.
• Use a "delay" option under SECURE 2.0 that lets the surviving spouse postpone RMDs until the deceased spouse would have reached their RMD age.

For high-net-worth widows and widowers, the right answer depends on age, cash flow needs, and whether the broader estate has separate liquidity. This is decision-by-decision territory; getting it wrong (especially the rollover timing) can be expensive and largely irreversible.

The Tax Strategy: Don't Just Wait Until Year 10

Here's the trap that catches a lot of professionals who inherit large traditional IRAs: it sounds smart to defer all distributions to year 10 and let the account compound. For taxable inherited IRAs, that strategy is usually wrong.

Why? Because every dollar of a traditional inherited IRA distribution is taxed as ordinary income in the year you take it. If you wait until year 10 and take a $2 million distribution in a single year, you're paying tax on most of it at the top federal rate (currently 37%) — plus possibly state income tax, plus Medicare surcharges, plus the 3.8% net investment income tax flowing through to other parts of your return.

Spread that same $2 million over 10 years, and you might be paying a blended rate closer to 24–28% — saving hundreds of thousands of dollars in federal tax alone.

The optimal annual distribution depends on:

• Your current and projected marginal tax bracket. A high-earning 50-year-old should usually take more than the minimum in years where their other income is unusually low (sabbatical, business loss, retirement year).
• State of residence. If you're planning to move from California to Florida, you may want to delay distributions until after the move.
• Roth conversion strategy on your own accounts. Filling up your tax brackets with inherited IRA distributions instead of Roth conversions may make sense — or it may force you to push your own conversions further out.
• Tax sunsets and rate changes. Federal rates were locked in by the One Big Beautiful Bill Act in 2025, but state-level changes and Medicare IRMAA thresholds still move year to year.

This is the kind of multi-year tax projection most DIY beneficiaries don't run. It's also where working with a fee-only fiduciary advisor pays for itself in a single year, especially for inheritances over $500,000.

Common Mistakes to Avoid

The pattern of expensive errors is consistent. The big ones:

1. Taking a lump-sum distribution by accident. If you don't transfer the IRA into a properly titled "inherited IRA" (with the decedent's name still listed: "Jane Doe, deceased, IRA F/B/O John Doe, beneficiary"), the custodian may distribute the entire balance to you in a single tax year. This is largely irreversible. A non-spouse beneficiary cannot do a 60-day rollover of an inherited IRA.

2. Confusing inherited IRA rules with your own IRA rules. Inherited IRAs follow their own RMD rules, are not subject to the 10% early withdrawal penalty, and cannot be combined with your own IRA. They live in their own bucket.

3. Missing the annual RMD when the decedent had started RMDs. Now that the 2024 relief has expired, the 25% excise tax has real teeth. This is especially common for IRAs inherited in 2020–2023, where beneficiaries got into the habit of skipping annual distributions during the relief period.

4. Picking the wrong spousal option. A surviving spouse who is under 59½ and rolls the IRA into their own name loses penalty-free access. A spouse who is older than the decedent and rolls it into her own name may accelerate her own RMD age. These decisions are nuanced and largely permanent.

5. Forgetting state income tax. A few states tax inherited IRA distributions as ordinary income with no senior carve-outs. Distribution timing matters even more if you're a New York or California resident.

How This Fits Into Estate Planning

A large inherited IRA is rarely an isolated event — it usually arrives alongside a taxable brokerage account, a house, sometimes a business interest, and a step-up in basis on the non-retirement assets. The 10-year rule means the IRA is the asset on the most aggressive tax clock, and the rest of the estate should usually be drawn against second.

If you're the IRA owner (not the beneficiary), the 10-year rule should also reshape how you think about naming beneficiaries. Spreading a large IRA across multiple non-spouse beneficiaries can soften the bracket impact for each. Leaving the IRA to a properly drafted see-through trust preserves some control without sacrificing the 10-year structure — but most non-conduit trusts are an absolute mess under the SECURE Act and need a hard review. (Our explainer on trusts vs. wills covers the basics; the inherited IRA layer adds another reason to talk to an estate attorney.)

Charitable bequests of traditional IRA dollars also became dramatically more efficient under SECURE. The 10-year rule made tax-free charitable beneficiaries of pre-tax IRA dollars one of the cleanest planning moves available — far more efficient than leaving the same dollars to your kids and the after-tax brokerage to charity.

The 2026 federal estate tax exemption is now $15 million per person, permanently, but the income tax exposure on inherited IRAs has only gotten worse. That tradeoff — large estate tax cushion, brutal inherited IRA tax — is the planning reality for the next decade.

When to Bring in Professional Help

For an inherited IRA under roughly $250,000 with a simple beneficiary picture, you can probably handle this with a good CPA and one careful spreadsheet. Once the inheritance is larger — or layered onto your own already-complex tax situation — the math justifies professional planning.

A coordinated planner running point on a multi-year withdrawal schedule will typically look at:

• Annual tax-bracket projections through year 10
• Roth conversion stacking on your own retirement accounts
• Charitable strategies (qualified charitable distributions are not available from inherited IRAs for most non-spouse beneficiaries — that's a common misconception)
• IRMAA and net investment income tax thresholds
• State residency timing
• Coordination with the rest of the estate (taxable accounts, real estate, business interests)

If you're comparing options, our guides on what financial advisors actually cost and how to choose a financial advisor cover what fee-only fiduciary representation typically looks like for inheritances in this range. Be wary of advisors paid on commission to roll inherited assets into annuities — for most inheritors, this is a tax-and-fee disaster.

Frequently Asked Questions

Does the 10-year rule apply if I inherited an IRA before 2020?

No. Beneficiaries who inherited an IRA from someone who died before January 1, 2020 are grandfathered into the pre-SECURE "stretch IRA" rules. You continue to take life-expectancy RMDs across your own lifetime, even if the original owner died years ago.

What happens if I empty the inherited IRA before year 10?

Nothing bad — you're allowed to take distributions on whatever schedule you want, including all at once. The 10-year deadline is a maximum, not a minimum. The only catch is if the decedent died on or after their RBD, in which case you still must hit each year's minimum RMD even if you've already drained most of the account.

Can I roll an inherited IRA into my own IRA?

Only if you're the surviving spouse. Every other beneficiary must keep the assets in a properly titled inherited IRA — sometimes also called a "beneficiary IRA." A non-spouse beneficiary who takes possession of the funds personally has effectively cashed out the entire IRA in one taxable year.

What's the penalty for missing an annual RMD?

The excise tax is 25% of the shortfall, potentially reduced to 10% if you correct the missed distribution within the IRS correction window (generally two years) and file Form 5329 explaining the mistake. The penalty applies separately to each missed year, so multiple missed RMDs compound quickly.

Are inherited Roth IRAs really tax-free?

If the original owner satisfied the 5-year holding requirement before death (i.e., the Roth had been open for at least five tax years), then yes — qualified distributions from the inherited Roth are completely federal-income-tax-free. If the 5-year rule wasn't met, earnings (but not contributions or conversions) are taxable until the 5-year mark is reached.

What if I'm a minor child who inherited an IRA?

Minor children of the decedent are EDBs. They take life-expectancy RMDs while still a minor, but when they reach the age of majority (typically 18, sometimes 21 depending on state, with a possible extension if still in school), a 10-year countdown begins. The inherited IRA must then be empty by the end of the 10th year after the child becomes an adult.

Should I take the inherited IRA before doing Roth conversions on my own accounts?

Usually yes, for traditional inherited IRAs. Both fill up your tax brackets with ordinary income, but the inherited IRA has a hard 10-year deadline while your own Roth conversions are flexible. Most planners prioritize the inherited distributions and slow down (or skip) Roth conversions during the 10-year window. The exact stacking depends on your bracket projections, expected future tax rates, and whether you're approaching IRMAA cliffs.

My Two Cents

The 10-year rule is one of those tax provisions that punishes inertia. The default — do nothing, take a giant distribution in year 10 — is almost always the worst possible answer for a traditional inherited IRA, and it's the path most people end up on simply because the math is annoying and the deadline feels far away.

If you inherited an IRA in 2020 or later, the best thing you can do is sit down once — really once — and map out a 10-year distribution schedule that actually works with your career trajectory, your other income, your state plans, and your charitable intentions. Then revisit it every year as tax law and your own situation evolve.

The cost of getting this wrong is measured in six figures of avoidable federal income tax for inheritances over $1 million. The cost of getting it right is a few hours of planning and, for most people, a coordinated advisor relationship.

If you'd like to talk through your situation with a fiduciary who specializes in inherited IRA planning for high-net-worth families, you can book a free 30-minute consultation with the Private Wealth Collective team.

This article is for educational purposes only and does not constitute tax, legal, or investment advice. Inherited IRA rules are complex and depend on facts specific to your situation. Consult a qualified tax advisor or estate planner before making distribution decisions.