What are the inherited IRA rules now — and does the 10-year rule apply to you?

What did the SECURE Act change about inherited IRAs?

It ended the “stretch IRA” for most non-spouse beneficiaries — and replaced a lifetime of small, tax-managed withdrawals with a 10-year deadline.

Before the SECURE Act, a non-spouse beneficiary — typically an adult child — could stretch withdrawals from an inherited IRA over their own life expectancy. A 50-year-old inheriting a parent’s IRA could take modest required amounts for decades, letting the rest keep growing tax-deferred and keeping each year’s taxable income manageable.

For owners who died on or after January 1, 2020, that option is gone for most beneficiaries. Under the SECURE Act and SECURE 2.0, most non-spouse designated beneficiaries must now fully distribute the inherited IRA by December 31 of the tenth year following the owner’s death.

Ten years instead of a lifetime. For modest accounts, that’s a manageable change. For a large traditional IRA, it compresses decades of deferred taxes into a single decade of the beneficiary’s life — often their highest-earning decade. That compression is the entire reason this rule deserves a place in your estate planning, not just your heirs’ problem pile.

Do heirs have to withdraw every year, or just empty the account by year ten?

It depends on one fact about the original owner — and this is the detail that gets misstated constantly, including in professionally published articles.

The question: had the owner reached their required beginning date for RMDs before they died?

• Owner died on or after their required beginning date (they’d already started required minimum distributions): the beneficiary generally must take annual RMDs in years one through nine, and empty the account by the end of year ten.
• Owner died before their required beginning date: no annual withdrawals are required. The beneficiary just needs the account fully distributed by December 31 of year ten.

Under current law, RMDs start at age 73, rising to 75 for those born in 1960 or later — a moving line, so verify your own required beginning date against current IRS guidance (Publication 590-B) rather than an article’s snapshot, including this one.

Missing a required distribution carries an IRS penalty, so getting the “annual withdrawals or not” question right is not optional trivia. The mechanics of RMDs and the penalty for missing them are covered in detail in RMD rules and the penalty for missing one.

Who is exempt from the 10-year rule?

A defined list, called eligible designated beneficiaries — and if you’re on it, the old stretch treatment is still available:

• A surviving spouse — who also has options no one else gets, including treating the inherited IRA as their own.
• The owner’s minor children — until they reach majority, after which the 10-year clock starts.
• Disabled or chronically ill individuals, as defined by the IRS.
• Anyone not more than 10 years younger than the owner — a sibling close in age, for example.

Eligible designated beneficiaries may still stretch distributions over their own life expectancy rather than racing a 10-year clock.

Notice what the list rewards: precision on the beneficiary form. Whether a particular heir qualifies — and what election they should make once they inherit — turns on definitions and deadlines in the tax code. That’s CPA territory, and it’s worth a conversation before the forms are set, not after the account transfers.

Why can the 10-year rule become a tax problem for your kids?

Because every dollar out of a traditional IRA is ordinary taxable income to the person withdrawing it — and the 10-year rule forces those dollars out during what are often your children’s peak earning years.

Picture the common case. Your adult child is in their fifties, at the top of their career and their tax bracket. They inherit your traditional IRA. Every withdrawal stacks on top of their salary, taxed at their highest marginal rate — and the account must be empty within ten years, whether that timing suits them or not.

Wait until year ten and take it all at once, and the lump sum can push them into a higher bracket in a single year. Spread it evenly, and every one of those ten years carries the extra income. There’s no universally right answer — the best withdrawal schedule depends on their income, their bracket, and the account’s size. That’s precisely the math a CPA should run, by name and by year, not a rule of thumb from an article.

There’s also a planning question on your side of the table, while you’re still the owner: whether converting some of a traditional IRA to Roth during your own lower-income years changes what your heirs ultimately keep. A Roth IRA inherited under the 10-year rule still must be emptied in ten years — but qualified withdrawals come out federal-income-tax-free, which changes the stakes of the deadline entirely.

Whether conversions make sense for you is a fact-specific tax decision for your CPA or tax adviser; the mechanics and timing windows are laid out in the Roth conversion window.

This isn’t a sales pitch for any product — it’s arithmetic. The same account, passed the same way, can produce meaningfully different after-tax outcomes depending on decisions made before and after the inheritance. The families who come out ahead are the ones who did the math early.

Why does your beneficiary form matter more than your will here?

Because your IRA never touches your will. It passes by contract — the custodian pays whoever is named on the beneficiary designation form, directly, outside probate.

If the will says your daughter inherits everything and the IRA form still names your brother from 1998, your brother gets the IRA. The form wins. Every time.

For many retirees, the IRA and annuities are the largest assets they own — which means the most consequential estate decisions aren’t in the will at all. They’re on designation forms filed with custodians years ago. Who you name also determines which distribution rules apply: a spouse gets the full menu of options, an adult child gets the 10-year rule, an eligible designated beneficiary gets the stretch.

The broader picture — how wills, trusts, powers of attorney, and beneficiary designations fit together — is in the pillar overview: What is estate and legacy planning? And if you’re weighing whether a trust belongs in your plan at all, start with will vs. trust.

What should you actually do with this?

Three moves, each small, each consequential:

1. Pull your beneficiary forms and read them. Every IRA, 401(k), annuity, and life insurance policy. Confirm primary and contingent beneficiaries are who you’d choose today — not who you chose decades ago. Make this an annual habit, alongside the portfolio review.

2. Put the 10-year rule on the table with your CPA. If a large traditional IRA is headed for adult children, ask directly: what does their tax picture look like under the 10-year rule, and does anything we do now — withdrawal sequencing, Roth conversions — change it? Tax strategy for your specific numbers belongs with your CPA or tax adviser, and the answer differs family by family.

3. Keep the legal documents and the forms in agreement. An estate plan is the will, any trust, the powers of attorney, and the designation forms — all telling the same story. The legal documents are the work of a licensed estate planning attorney in your state; Asset Lift is an investment adviser, not a law firm, and nothing here is legal or tax advice.

What we can do is coordinate the account side — and make sure the largest assets you own aren’t governed by the oldest paperwork in the file.