The Inherited IRA Rules That Catch Non-Spouse Beneficiaries Off Guard

Inheriting an IRA from a parent or relative sounds simple until the distribution schedule arrives.

If you have been named beneficiary on a parent's IRA, or expect to be, you may have heard that the account must be emptied within ten years. That is true for many beneficiaries, but the details of how those ten years unfold have changed in the last few years, and the differences can affect both the tax bill and the timing of withdrawals. The rules turn on who you are, when the original owner died, and whether that owner had already begun required distributions.

For families with meaningful retirement accounts, this is worth understanding before an inheritance arrives, because the account owner's own decisions can shape what the beneficiary eventually faces.

Schedule a complimentary consultation with Ben Loughery.

The 10-year rule in plain terms

Under the SECURE Act, most non-spouse beneficiaries who inherit an IRA are no longer able to stretch withdrawals over their own lifetime. Instead, the account generally has to be fully distributed by the end of the tenth year following the year of the owner's death.

The rule sets an outer deadline. It does not, by itself, say how much has to come out in any given year, and that is where a second question comes in.

Do annual withdrawals apply during the 10 years?

The IRS finalized regulations that settled a point of confusion for several years. According to those rules, whether a beneficiary must take annual required minimum distributions during the ten-year window depends on whether the original owner had already started taking required distributions before death.

• If the owner died after reaching the point where required distributions had begun, a non-spouse beneficiary subject to the 10-year rule generally must take annual distributions in years one through nine, and then empty the account by year ten.
• If the owner died before that point, the beneficiary generally has flexibility on timing within the ten years, as long as the account is empty by the deadline.

The final regulations took effect in 2025, and the IRS had provided relief for missed annual distributions during 2021 through 2024. Anyone who inherited an account in that period may want to confirm with a tax professional how those transition rules apply to their situation.

A Roth IRA owner is not subject to lifetime required distributions, so the 10-year deadline is the main constraint on an inherited Roth account. The tax treatment of the withdrawals differs from a traditional IRA, which is a separate part of the planning conversation.

Who is exempt: eligible designated beneficiaries

Some beneficiaries are not bound by the 10-year rule and can generally use a longer payout based on life expectancy. The categories include:

• A surviving spouse
• The account owner's minor child (until reaching the age of majority, at which point the 10-year clock generally begins)
• A beneficiary who is disabled or chronically ill
• A beneficiary who is not more than ten years younger than the account owner, such as a sibling close in age

Adult children, grandchildren, and most friends or other relatives fall outside these categories, so the 10-year rule typically applies to them.

Why timing within the ten years deserves thought

Because inherited traditional IRA withdrawals are taxed as ordinary income, the pattern of distributions can carry meaningful consequences for the beneficiary's tax bracket. Consider a hypothetical example: Daniel, a 52-year-old consultant in his highest-earning years, inherits a traditional IRA from his mother. Taking everything in year ten could push a large amount of income into a single return, while spreading withdrawals could keep each year's taxable income more even. If Daniel expects his income to fall at some point in the decade, perhaps at retirement, that may influence how he sequences withdrawals.

This is an illustration only, and Daniel is a fictional beneficiary. In practice, the right pattern depends on the beneficiary's other income, state taxes, the account's investments, and whether annual distributions are required in the first place.

Questions for the original account owner, too

The rules also open a conversation on the owner's side. Some questions families explore with an advisor and an estate attorney include:

• Whether beneficiary designations are current and name the intended people
• Whether Roth conversions during the owner's lower-income years could reduce the tax burden a beneficiary later inherits
• Whether the account's size and the beneficiary's own tax situation suggest a different mix of assets to leave to different heirs
• Whether a trust is named as beneficiary, since trusts add their own distribution and tax considerations

What would you want your beneficiaries to face?

An inherited IRA tends to arrive during a difficult time, and the distribution rules can add pressure on top of grief. Whether you expect to inherit an account or you are planning for the people who will inherit yours, a conversation about the mechanics ahead of time can make the eventual decisions clearer.

Schedule a complimentary consultation with Ben Loughery.

Ben Loughery is a CERTIFIED FINANCIAL PLANNER® and founder of Lock Wealth Management, based in Atlanta, GA. He specializes in retirement income planning, tax optimization, and helping clients build financial confidence at every stage of life.

This post is educational and is not tax or legal advice. Rules depend on individual circumstances; consult a qualified professional.