There is no single set of inherited IRA rules. There are five, and picking the wrong one can cost you thousands in unnecessary taxes or IRS penalties. Which set applies depends on your relationship to the person who died, when they died, whether they had already started taking Required Minimum Distributions, and whether the account is a traditional or Roth IRA. This guide walks through each of the five rule sets, explains who qualifies for each, and covers the critical changes the IRS finalized in July 2024.
Starting in 2025, the IRS enforces annual RMD requirements during the 10-year inherited IRA depletion window when the original owner had already started RMDs. The four-year penalty relief period (2021-2024) is over. Missing a required distribution now triggers a 25% excise tax on the shortfall.
Before the SECURE Act took effect on January 1, 2020, the rules were relatively simple. Most beneficiaries could "stretch" distributions from an inherited IRA over their own life expectancy. The SECURE Act eliminated that option for the majority of non-spouse beneficiaries and replaced it with a 10-year depletion window. Then the SECURE 2.0 Act in 2022 changed the Required Minimum Distribution ages. Then the IRS spent four years debating whether annual distributions were required during that 10-year window before issuing final regulations in July 2024 (T.D. 10001). Technical detail
The result is five distinct rule sets. The one that applies to you depends on three questions: (1) What is your relationship to the deceased? (2) When did they die? (3) Had they already started taking RMDs?
Rule Set 1: Spousal Rollover (Surviving Spouse Treats the IRA as Their Own)
Surviving spouses have an option nobody else gets: they can roll the inherited IRA into their own IRA and treat it as if they had always owned it. IRC Section 408(d)(3)(C) permits a surviving spouse to roll over inherited IRA assets into the spouse's own IRA. This is not an inherited IRA anymore. It becomes the surviving spouse's IRA, subject to the same rules as any IRA the spouse opened themselves.
How it works. The surviving spouse can do this in one of two ways:
- Direct rollover. Move the assets into a new or existing IRA in the surviving spouse's own name. The account is no longer an inherited IRA.
- Redesignation. Notify the IRA custodian that the surviving spouse elects to treat the deceased spouse's IRA as their own. No asset movement required.
RMD implications. Once the account is rolled over, the surviving spouse does not need to take RMDs until they reach their own RMD age: 73 for those born 1951-1959, or 75 for those born 1960 or later. SECURE 2.0 Act, Section 107, codified at IRC Section 401(a)(9)(C)(i). RMDs are calculated using the Uniform Lifetime Table, which produces smaller required withdrawals than the Single Life Table used for beneficiaries.
When the spousal rollover is advantageous: When the surviving spouse is younger than the deceased and wants to delay distributions as long as possible. The rollover resets the RMD clock entirely.
When it might not be: When the surviving spouse is under 59 1/2 and needs access to the funds. Withdrawals from their own IRA before age 59 1/2 face a 10% early withdrawal penalty under IRC Section 72(t). Keeping the account titled as an inherited IRA avoids that penalty, since the early withdrawal penalty does not apply to inherited IRAs. (For more on how RMDs work in retirement generally, see Your First Year of Retirement Taxes.)
SECURE 2.0 addition: the spousal election. SECURE 2.0 added a new option under IRC Section 401(a)(9)(B)(iv) that allows a surviving spouse to delay RMDs from the inherited IRA until the later of: when the deceased spouse would have turned their RMD age, or when the surviving spouse reaches their own RMD age. If the surviving spouse dies before RMDs begin, the account is treated as if the surviving spouse were the original owner for purposes of the beneficiary's distribution rules.
Rule Set 2: The 10-Year Rule (Most Non-Spouse Beneficiaries After 2019)
If you are a non-spouse beneficiary who inherited an IRA from someone who died on or after January 1, 2020, and you are not an "eligible designated beneficiary" (covered in Rule Set 3), this is your rule set. It applies to adult children, siblings, friends, and most trusts.
The basic requirement. The entire inherited IRA must be fully distributed by December 31 of the year containing the 10th anniversary of the original owner's death. IRC Section 401(a)(9)(H)(i), as added by the SECURE Act, Section 401.
The annual RMD question. This was the subject of intense confusion from 2020 through 2024. The IRS proposed regulations in February 2022 suggesting that annual RMDs were required during the 10-year window if the original owner had already reached their RMD start date. Then the IRS issued four consecutive years of penalty relief notices (Notices 2022-53, 2023-54, 2024-35) while it finalized the rules.
The final regulations (T.D. 10001, effective for distribution calendar years beginning January 1, 2025) confirmed two tracks:
- Owner died before their RMD start date. No annual RMDs required. You can take distributions in any amounts and any years you choose, as long as the account is fully emptied by the end of year 10.
- Owner died on or after their RMD start date. Annual RMDs are required in years 1 through 9, calculated using the beneficiary's single life expectancy. The remaining balance must be distributed by the end of year 10. Treas. Reg. Section 1.401(a)(9)-5(d)(1), as finalized in T.D. 10001.
Transition relief for 2021-2024. If you inherited an IRA from someone who died after their RMD start date and you did not take annual distributions in 2021, 2022, 2023, or 2024, the IRS has waived the penalty. No excise tax applies for those years. IRS Notice 2024-35, extending relief previously granted in Notices 2022-53 and 2023-54. But starting in 2025, the annual RMD requirement is enforced.
Practical example. Sarah's father died in 2022 at age 78 (after his RMD start date). Sarah, age 50, inherited his traditional IRA worth $400,000. Under the final regulations:
- Sarah must take annual RMDs in 2025 through 2031 (years 3-9 of the 10-year window; years 1-2 were covered by penalty relief)
- The entire remaining balance must be distributed by December 31, 2032
- Her 2025 RMD is calculated by dividing the December 31, 2024 account balance by her single life expectancy factor
Rule Set 3: The Stretch IRA (Eligible Designated Beneficiaries)
The "stretch" IRA did not disappear entirely. It survived for a narrow category of beneficiaries the tax code calls "eligible designated beneficiaries" (EDBs). These individuals can still take distributions over their own life expectancy, which can extend distributions over decades. IRC Section 401(a)(9)(E)(ii), defining eligible designated beneficiaries.
Who qualifies as an eligible designated beneficiary:
- Surviving spouse (who may also use Rule Set 1 instead)
- Minor child of the account owner (not grandchildren, nieces, or nephews -- only the owner's own child). The stretch applies until the child reaches age 21, at which point the 10-year rule kicks in and the account must be fully distributed within 10 years of the child's 21st birthday. IRC Section 401(a)(9)(E)(iii).
- Disabled individual as defined under IRC Section 72(m)(7) -- unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment
- Chronically ill individual as defined under IRC Section 7702B(c)(2) -- unable to perform at least two activities of daily living, or requiring substantial supervision due to cognitive impairment
- Individual not more than 10 years younger than the deceased account owner
How the stretch works for EDBs. Annual RMDs begin in the year after the owner's death. The amount is calculated using the beneficiary's single life expectancy from the IRS Single Life Table. IRS Publication 590-B, Table I. Each year, the life expectancy factor is reduced by one.
What happens when EDB status ends. For minor children, when they turn 21 the 10-year depletion clock starts. For disabled and chronically ill individuals, the stretch continues for life. For the not-more-than-10-years-younger beneficiary, the stretch also continues for life.
Pre-2020 beneficiaries. If you inherited an IRA from someone who died before January 1, 2020, you are grandfathered under the old rules regardless of your relationship. You can continue using the stretch method, taking RMDs over your own life expectancy.
Rule Set 4: The 5-Year Rule
The 5-year rule requires that the entire inherited IRA balance be distributed by December 31 of the year containing the fifth anniversary of the owner's death. No annual minimum distributions are required during that five-year window; you simply must empty the account by the deadline. IRC Section 401(a)(9)(B)(ii).
When the 5-year rule applies today:
- The account owner died before their RMD start date, AND
- There is no designated beneficiary (the estate is the beneficiary, or the beneficiary designation form was never filed)
For deaths on or after January 1, 2020, the 5-year rule is less common because most beneficiaries fall under either the 10-year rule or the EDB stretch rules. But it still applies when the IRA has no designated beneficiary.
The key distinction: If the owner died before their required beginning date and the estate inherited, it is the 5-year rule. If the owner died on or after their required beginning date and the estate inherited, it is the remaining life expectancy method (Rule Set 5).
Some IRA plan documents also offer the 5-year rule as an option for designated beneficiaries, even when the 10-year rule would otherwise apply. Check the custodian's terms.
Rule Set 5: No Designated Beneficiary (Estate or Non-Qualifying Entity)
When there is no designated beneficiary -- the estate inherits, a charity inherits, or a non-qualifying trust inherits -- the rules depend on whether the owner had already started RMDs.
- Owner died before their RMD start date. The 5-year rule applies (Rule Set 4 above). The entire balance must be distributed by December 31 of the year containing the fifth anniversary of death.
- Owner died on or after their RMD start date. Distributions must be taken over the deceased owner's remaining single life expectancy, recalculated using the IRS Single Life Table as of the year of death. Treas. Reg. Section 1.401(a)(9)-4(c). Each subsequent year, the factor is reduced by one.
Why this matters. If someone dies without a valid beneficiary designation form on file, the IRA defaults to the estate per the custodian's plan document. This is almost always the worst outcome: the estate gets the shortest distribution window, no option for a spousal rollover, and no possibility of the stretch. Keeping beneficiary designation forms current is one of the simplest ways to avoid this scenario.
Step 1: Are you the surviving spouse? Yes: Rule Set 1 (spousal rollover) or Rule Set 3 (stretch as EDB). You choose. No: Continue to Step 2.
Step 2: Were you named as a beneficiary on the account (not through the estate)? No: Rule Set 5 (no designated beneficiary). If owner died before RMD start date, use the 5-year rule. If after, use owner's remaining life expectancy. Yes: Continue to Step 3.
Step 3: Did the account owner die before January 1, 2020? Yes: Pre-SECURE Act rules. You can stretch distributions over your own life expectancy regardless of relationship. No: Continue to Step 4.
Step 4: Are you an eligible designated beneficiary? Minor child of the owner, disabled, chronically ill, or not more than 10 years younger: Rule Set 3 (stretch, with transition to 10-year rule for minor children at age 21). No: Rule Set 2 (10-year rule).
- Entire $400,000 balance withdrawn in a single year
- Pushes income into the 32-35% federal bracket
- May trigger Medicare IRMAA surcharges for two years
- Could increase Social Security benefit taxation
- Approximately $40,000-$50,000 per year (varying with growth)
- Stays within the 22-24% bracket each year
- Avoids IRMAA surcharge triggers
- Social Security taxation stays at lower thresholds
Inherited Roth IRAs follow the same five rule sets for determining which distribution timeline applies. The structural differences are about taxation, not timing.
No income tax on distributions. Qualified distributions from an inherited Roth IRA are tax-free. The original owner already paid income tax on the contributions, and qualified earnings are also tax-free. IRC Section 408A(d)(1).
No annual RMDs within the 10-year window. Because the original Roth IRA owner was never subject to RMDs during their lifetime, the "owner died before RMD start date" track always applies for inherited Roth IRAs under the 10-year rule. This means no annual distribution requirements -- just full depletion by year 10. Treas. Reg. Section 1.401(a)(9)-5(d)(1).
Strategic advantage. This makes inherited Roth IRAs significantly more flexible. A non-spouse beneficiary can let the account grow tax-free for up to 10 years and take the entire balance out in year 10 with no income tax consequences.
The 5-year holding period still matters. For earnings to be tax-free, the Roth IRA must have been open for at least five tax years (counting from the original owner's first contribution). IRC Section 408A(d)(2)(B). If the owner opened the Roth only two years before death, the beneficiary needs to wait three more years before withdrawing earnings tax-free -- though they can withdraw contributions tax-free at any time.
Tax Planning Strategies for Each Rule Set
Spousal rollover (Rule Set 1):
- If you are younger than 59 1/2, consider keeping the account as an inherited IRA until you reach 59 1/2 to avoid the early withdrawal penalty, then rolling it over
- If you do not need the funds, the rollover lets you delay RMDs as long as possible, maximizing tax-deferred growth
- Consider Roth conversions of the inherited IRA if you are in a temporarily low tax bracket (common in the years between a spouse's death and the start of Social Security or your own RMDs)
10-year rule (Rule Set 2):
- Do not wait until year 10 to take the entire balance. Withdrawing $500,000 in a single year will push you into the highest tax brackets. Spreading distributions across all 10 years keeps each year's taxable income lower
- Model the tax brackets each year. If you have a year with lower income (job loss, gap year, early retirement), accelerate distributions into that year
- For inherited Roth IRAs, the opposite strategy applies: delay as long as possible to maximize tax-free growth, then take it all in year 10
Stretch IRA (Rule Set 3):
- Take only the required minimum each year to maximize tax-deferred growth
- If you are disabled or chronically ill, coordinate inherited IRA distributions with other income sources to stay below thresholds for Social Security taxation and Medicare surcharges
5-year rule (Rule Set 4):
- Similar to the 10-year rule, spread distributions across the five years rather than taking a lump sum
- Front-load distributions if you expect your income to rise in later years
Not taking annual RMDs when required under the 10-year rule. Starting in 2025, if the original owner died on or after their RMD start date, annual distributions are mandatory. Missing one triggers a 25% excise tax under IRC Section 4974 on the shortfall (reduced to 10% if corrected within the IRS correction window under SECURE 2.0).
Rolling an inherited IRA into your own IRA when you are not a spouse. Only surviving spouses can do this. A non-spouse beneficiary who moves inherited IRA funds into their own IRA will have the entire amount treated as a taxable distribution. There is no way to undo this.
Letting the beneficiary designation form go stale. Naming "my estate" as beneficiary, or failing to update the form after a divorce, pushes the account into Rule Set 5 -- the worst distribution timeline.
Ignoring the Roth conversion opportunity. The years between inheriting a traditional IRA and the 10-year depletion deadline represent a planning window. Converting portions of the inherited account to a Roth IRA is not allowed (you cannot convert an inherited IRA). But if you have your own traditional IRA, you can convert that to Roth while using inherited IRA distributions to cover living expenses, effectively shifting your overall retirement savings toward tax-free accounts.
Missing the 5-year holding period for inherited Roth IRAs. If the original Roth IRA was less than five years old at the time of death, earnings withdrawn before the five-year mark are taxable. Beneficiaries sometimes do not check this and end up with an unexpected tax bill.
For inherited Roth IRAs under the 10-year rule, the opposite strategy applies: delay distributions as long as possible. Because the original Roth owner was never subject to RMDs, no annual distributions are required during the 10-year window. The entire balance can grow tax-free for a full decade and be withdrawn tax-free in year 10.
Inherited IRA rules are one of the areas where professional advice pays for itself most directly. A CPA or tax advisor who specializes in retirement distributions can:
- Identify your rule set. The decision tree above covers the most common scenarios, but trusts, multiple beneficiaries, and successor beneficiaries introduce complications that require professional analysis
- Model the 10-year distribution schedule. Spreading distributions to minimize total taxes over the decade requires projecting your income, deductions, and tax brackets for each of those years
- Coordinate with other inherited assets. If you also inherited a stepped-up basis asset, the interaction between capital gains planning and inherited IRA distributions affects both
- Avoid the expensive mistakes. The 25% excise tax on missed RMDs, the accidental taxable distribution from a botched rollover, the expired beneficiary form -- these are all preventable with the right guidance