Inherited IRA Rules: What Beneficiaries Need to Know

Inheriting an IRA isn't like inheriting cash — the rules for how and when you must withdraw the money depend heavily on your relationship to the person who left it to you, and getting them wrong can trigger a 25% IRS penalty on money you should have withdrawn but didn't.

If You're the Spouse

Spouses have the most flexibility: you can roll the inherited IRA into your own IRA and follow normal age-based required minimum distribution (RMD) rules as if it had always been yours, or keep it as a separate inherited IRA and use your own life expectancy for distributions. Rolling it into your own IRA is usually best if you don't need the money soon and want it to keep growing tax-deferred longer.

If You're a Non-Spouse Beneficiary

Under the SECURE Act (2019), most non-spouse beneficiaries — adult children, siblings, friends — must fully deplete the inherited IRA within 10 years of the original owner's death. There's no fixed annual withdrawal requirement within that window for most beneficiaries, but the full balance must be gone by December 31 of year 10, and recent IRS guidance requires annual withdrawals in some cases if the original owner had already started RMDs.

Eligible Designated Beneficiaries (the Exceptions)

• A surviving spouse (covered above, most flexibility)
• A minor child of the original owner (10-year clock starts once they reach the age of majority)
• A beneficiary who is disabled or chronically ill under IRS definitions
• A beneficiary no more than 10 years younger than the original owner

These groups can stretch distributions over their own life expectancy instead of the 10-year rule, which can significantly reduce the tax hit compared to being forced to withdraw everything within a decade.

Tax Treatment

Withdrawals from an inherited traditional IRA are taxed as ordinary income in the year you take them. Inherited Roth IRAs still must follow the same 10-year (or life expectancy) withdrawal rules for non-spouse beneficiaries, but qualified withdrawals themselves remain tax-free — so the 10-year clock matters less for taxes and more for how long the money keeps growing tax-free.