Inheriting an IRA can feel overwhelming—especially when required minimum distribution (RMD) rules enter the picture. Recent changes under the SECURE Act have made inherited IRA rules more complex, and misunderstanding them can lead to unnecessary taxes or costly penalties.

Whether you’ve recently inherited an IRA or expect to in the future, understanding inherited IRA RMD rules is essential to protecting the value of what was passed down and making informed financial decisions.

What Is an Inherited IRA?

An inherited IRA is a retirement account passed to a beneficiary after the original owner’s death. These accounts follow different rules than IRAs you fund yourself, and those rules depend on:

• Your relationship to the original account owner
• Whether the IRA is Traditional or Roth
• The owner’s age at death
• The year the inheritance occurred

Each factor affects how and when distributions must be taken.

How the SECURE Act Changed Inherited IRA RMD Rules

The SECURE Act significantly reshaped inherited IRA distribution rules. Before its passage, many beneficiaries could stretch withdrawals over their lifetime. Today, most non-spouse beneficiaries must follow the 10-year rule.

The 10-Year Rule Explained

Under the 10-year rule:

• The inherited IRA must be fully withdrawn by the end of the 10th year following the owner’s death
• Certain beneficiaries may also be required to take annual RMDs during that period

Failing to meet these requirements can result in IRS penalties, making proper planning critical.

Who Is Exempt From the 10-Year Rule?

Some beneficiaries qualify as Eligible Designated Beneficiaries (EDBs) and may still use lifetime distributions:

• Surviving spouses
• Minor children of the original owner (until adulthood)
• Disabled or chronically ill individuals
• Beneficiaries who are not more than 10 years younger than the original owner

Each category has specific conditions, so identifying your beneficiary status is an important first step.

Inherited IRA RMD Rules: Traditional vs. Roth IRAs

Inherited Traditional IRA

• Distributions are generally taxable as income
• RMDs may be required annually
• Large withdrawals can increase your tax burden in certain years

Inherited Roth IRA

• Distributions are typically tax-free
• The 10-year rule still applies
• No lifetime RMDs for the original owner, but beneficiaries must meet deadlines

Understanding these differences helps beneficiaries manage both timing and taxes more effectively.

Do You Need to Take Annual RMDs Under the 10-Year Rule?

This is one of the most confusing aspects of inherited IRA RMD rules.

• If the original owner had already started taking RMDs, beneficiaries may need to take annual distributions
• If the owner had not started RMDs, beneficiaries may have more flexibility—but must still empty the account by year 10

Because IRS guidance has evolved, careful review of your situation is essential.

Common Inherited IRA Mistakes to Avoid

• Assuming all beneficiaries follow the same rules
• Missing required distribution deadlines
• Withdrawing too much in a single year and increasing taxes
• Ignoring how inherited IRAs affect your broader financial plan
• Treating the inheritance as a short-term windfall

Inherited IRAs work best when approached with long-term planning in mind.

Why Inherited IRA Decisions Belong in Legacy Planning

Inherited IRA RMD rules affect more than just annual taxes. They influence:

• How effectively wealth is transferred
• Whether assets last across generations
• How closely outcomes align with the original owner’s wishes

This is why inherited IRAs are best addressed through thoughtful legacy and wealth transfer planning, rather than as a standalone tax issue.

Inherited IRA rules are complex, and small missteps can quietly reduce the value of what was passed down. Distribution timing, tax exposure, and beneficiary decisions all matter.

MASG Financial’s Legacy and Wealth Transfer Planning approach helps families navigate inherited IRAs with clarity and intention—aligning tax strategy, beneficiary rules, and long-term goals so wealth transfers efficiently across generations.

Special Considerations for Surviving Spouses

Surviving spouses often have more flexibility than other beneficiaries. Options may include:

• Treating the inherited IRA as their own
• Delaying RMDs until their own required age
• Rolling assets into an existing retirement account

Choosing the right option depends on age, income needs, and future planning goals.

Final Thoughts

Inherited IRA RMD rules are no longer simple, and mistakes can be costly. Understanding your beneficiary status and distribution requirements can help protect inherited assets and reduce unnecessary tax exposure.

When inherited IRAs are coordinated with a broader legacy plan, they become a meaningful part of long-term financial security rather than a source of stress.