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

A decade to empty the account sounds like plenty of room to plan — but for many non-spouse beneficiaries, that decade comes with rules they never hear about until the IRS sends a notice.

The SECURE Act of 2019 ended the old "stretch IRA," where a non-spouse beneficiary could spread withdrawals across their own life expectancy, sometimes over forty or fifty years. In its place came a flat ten-year window to empty the account. For a while, it wasn't clear whether beneficiaries needed to take anything out during those ten years or could simply wait until the deadline. The IRS settled the question with final regulations in July 2024: if the original account owner had already started required minimum distributions before death, most beneficiaries now owe annual withdrawals in years one through nine, with the balance due by December 31 of year ten.

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Who Actually Falls Under the 10-Year Rule

Not every beneficiary is treated the same way. The IRS splits beneficiaries into two groups, and which one applies changes the entire withdrawal timeline.

Eligible designated beneficiaries can still stretch

A narrow category of beneficiaries keeps the old stretch option, spreading withdrawals over their own life expectancy using the IRS Single Life Table. This group includes:

• A surviving spouse, who also has the option to treat the inherited IRA as their own.
• A minor child of the original owner — though once that child reaches age 21, the ten-year clock starts, and the account must be emptied by the time they turn 31.
• A beneficiary who is disabled or chronically ill, as defined under the tax code.
• A beneficiary who is not more than ten years younger than the original owner, such as a sibling close in age.

Everyone else gets ten years, not a lifetime

Adult children, grandchildren, friends, and most trusts named as beneficiary fall into the second group. For these beneficiaries, the account must be fully distributed within ten years of the owner's death. Whether annual withdrawals are required during those ten years, or the beneficiary can wait and choose their own timing, depends on one detail: had the original owner reached their required beginning date for RMDs before they died? If yes, annual distributions are required in years one through nine. If the owner died before that date, the beneficiary can decide when to withdraw within the ten years, as long as the account is empty by year ten.

Why the Timing Question Carries Tax Consequences

Skipping a required annual distribution isn't just a paperwork lapse. Under SECURE 2.0, the excise tax on a missed RMD is 25% of the amount that should have been withdrawn, dropping to 10% if the shortfall is corrected within the IRS's timely-correction window. Beyond the penalty, there's a planning cost too: an inherited traditional IRA distribution counts as ordinary income, so a beneficiary who waits and takes one large withdrawal in year ten risks pushing an otherwise moderate income year into a much higher bracket, right when the account balance — and the tax bill — has grown the most.

Consider a hypothetical example. James and Priya Whitfield inherit a $600,000 traditional IRA from Priya's father in 2026. He had already been taking RMDs, so the couple owes annual withdrawals starting in 2027. If they ignore that requirement and let the account sit, they could face a withdrawal well over $600,000 by 2036, layered on top of whatever else they're earning that year — a very different tax outcome than spreading withdrawals across nine or ten years at a steadier pace.

Questions Worth Raising With an Advisor

The ten-year rule turns what used to be a straightforward inheritance into a series of annual decisions: how much to withdraw each year, which years call for more or less, and how the withdrawals interact with the beneficiary's own income, other retirement accounts, and tax bracket. A Roth IRA inherited under the same ten-year rule carries no required annual withdrawals during that window, since Roth accounts aren't subject to RMDs for the original owner — though the full balance still needs to come out by year ten.

For account owners doing their own planning, the rules raise a separate question: does it still make sense to leave a large traditional IRA to an adult child, given the tax exposure they'll now face on a compressed timeline? Some families weigh Roth conversions during their own lifetime, or naming a spouse or charitable beneficiary for part of the account, specifically because of how the ten-year rule changed the math.

What Would a Ten-Year Deadline Mean for Your Family's IRA?

If you've inherited an IRA in the past few years, or expect to, the rules that apply depend on your relationship to the original owner, their age at death, and whether they'd already started RMDs. Getting the sequence of withdrawals wrong can mean an unnecessary tax bill or a penalty that was simple to avoid with the right timeline in place.

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.