By Harry Prabandham · Updated September 28, 2026
Tax Planning
Inherited IRA Tax Strategy: The 10-Year Rule, Annual RMDs, and Timing
Most non-spouse heirs must empty an inherited IRA within 10 years; if the owner had started RMDs, annual withdrawals are also required in years 1–9.
Inherited IRA Tax Strategy: The 10-Year Rule, Annual RMDs, and Timing
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How are inherited IRAs taxed and distributed?
- For deaths after 2019, most non-spouse beneficiaries must empty the account by December 31 of the tenth year after the owner's death.
- If the owner died on or after their required beginning date, the beneficiary must also take annual RMDs in years one through nine.
- Traditional IRA withdrawals are taxed as ordinary income; qualified Roth withdrawals are generally tax-free.
- Inherited IRA distributions are not subject to the 10% early-distribution tax, regardless of the beneficiary's age.
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How are inherited IRAs taxed and distributed?
- For deaths after 2019, most non-spouse beneficiaries must empty the account by December 31 of the tenth year after the owner's death.
- If the owner died on or after their required beginning date, the beneficiary must also take annual RMDs in years one through nine.
- Traditional IRA withdrawals are taxed as ordinary income; qualified Roth withdrawals are generally tax-free.
- Inherited IRA distributions are not subject to the 10% early-distribution tax, regardless of the beneficiary's age.
Who can still stretch withdrawals over their life expectancy?
- Eligible designated beneficiaries include the surviving spouse, the owner's minor child, and disabled or chronically ill individuals.
- A beneficiary not more than ten years younger than the owner is also eligible.
- An owner's minor child can use life-expectancy payouts until age 21, after which the 10-year clock starts.
- Beneficiaries that are not individuals, such as estates or some trusts, face different and often shorter payout rules.
What options does a surviving spouse have?
- A spouse can treat the IRA as their own or roll it over, which delays RMDs until the spouse's own required beginning age of 73 or 75.
- A spouse can remain a beneficiary, which allows penalty-free withdrawals before age 59½.
- A spouse who stays a beneficiary can later switch to treating the account as their own.
- A qualified disclaimer, generally made within nine months of death, passes the account to the contingent beneficiary instead.
How does an inherited Roth IRA differ?
- The 10-year rule applies, but annual RMDs are not required during the period because Roth owners have no lifetime RMDs.
- Distributions are tax-free if the original owner's Roth had met the five-year holding requirement.
- Leaving funds in the account until later in the 10-year window keeps growth tax-free longer.
- Withdrawals do not add to taxable income, so they do not raise brackets or Medicare premiums.
How can withdrawals be timed across the 10-year window?
- Larger withdrawals in lower-income years, such as a sabbatical or early retirement, can keep more income in lower brackets.
- Spreading withdrawals evenly can avoid a single year with a large spike of taxable income.
- Withdrawals can affect IRMAA Medicare surcharges, net investment income tax thresholds, and financial aid.
- State of residence at the time of withdrawal determines state tax, which matters for anyone planning a move.
What can the original owner do in advance?
- Keep beneficiary designations current, since they override a will for the account.
- Roth conversions during life shift income tax to the owner and leave heirs a tax-free account, at the cost of tax paid now.
- Naming a trust requires careful drafting, because conduit and accumulation trusts are treated differently.
- Charitable bequests of traditional IRA dollars avoid income tax that an individual heir would owe.
Key takeaways
- Most non-spouse heirs have 10 years, plus annual RMDs if the owner had reached the required beginning date.
- Spouses, minor children, disabled or chronically ill heirs, and near-age heirs have more flexible options.
- Inherited Roth IRAs have no annual RMDs within the 10-year window.
- Confirm RMD calculations with a CPA; missed RMDs carry a 25% excise tax, reduced to 10% if corrected timely.
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