Inherited IRA (Individual Beneficiary): The Complete Guide (2026)

What Is an Inherited IRA?

An inherited IRA is a retirement account you receive after the original owner dies. It's also called a beneficiary IRA. It holds the assets from the deceased person's IRA or employer-sponsored retirement plan.

It is not your IRA. You didn't contribute to it. You can't add money to it. The rules for how and when you must take money out are different from the rules that applied to the original owner.

Those rules depend on three things: your relationship to the person who died, whether they had already started taking Required Minimum Distributions, and when they died.

Get any one of those wrong and you're looking at penalties. Get all three right and you can plan your withdrawals to minimize the tax hit.

Why the Rules Changed

Before 2020, anyone who inherited an IRA could stretch distributions over their own life expectancy. A 40-year-old inheriting a $500,000 IRA could take small withdrawals for decades, letting the bulk of the account keep growing tax-deferred. That was the "stretch IRA."

The SECURE Act of 2019 killed it for most beneficiaries.

Starting January 1, 2020, most non-spouse individual beneficiaries must empty the inherited IRA within 10 years of the original owner's death. No more lifetime stretch.

Then the IRS added another layer. In 2022, they proposed regulations clarifying that some beneficiaries under the 10-year rule also have to take annual RMDs during those 10 years. Not just empty it by year 10. Take money out every single year.

That caught a lot of people off guard. The IRS waived penalties for missed annual RMDs from 2021 through 2024 while everyone figured out the rules. That grace period is over. Starting in 2025, the penalties apply.

Beneficiary Categories

The IRS divides individual beneficiaries into three categories. Which one you fall into determines everything about your distribution options.

1. Surviving Spouse

You inherited the IRA from your husband or wife. You have the most options of any beneficiary type. The SECURE Act did not change the rules for surviving spouses.

2. Eligible Designated Beneficiary (EDB)

You're an individual who fits one of these specific categories:

• Minor child of the deceased (under age 21, and only a child of the account owner — not a grandchild)
• Disabled individual (meets the IRS definition of permanent and total disability)
• Chronically ill individual (as certified by a physician)
• Individual not more than 10 years younger than the deceased

EDBs can still stretch distributions over their life expectancy, similar to the old rules. They're the exception to the 10-year rule.

3. Designated Beneficiary (Non-Eligible)

Everyone else. This is the category most people fall into. Adult children, siblings, friends, non-spouse partners. If you're an individual beneficiary and you don't qualify as a surviving spouse or an EDB, you're here.

You're subject to the 10-year rule.

Surviving Spouse: Your Options

Surviving spouses have more flexibility than any other beneficiary. You have three main choices, and the right one depends on your age, whether you need the money now, and whether the deceased had already started RMDs.

Option 1: Treat It as Your Own

Roll the inherited IRA into your own IRA (or elect to treat it as your own). This is the most common choice for surviving spouses.

Once you do this, the account follows your rules. Your RMD age. Your life expectancy. Your beneficiary designations. It's as if you always owned it.

When this makes sense: You're already past 59½, you don't need the money right away, and you want to delay RMDs as long as possible.

When this backfires: You're under 59½ and might need the money. Once you treat it as your own, any withdrawal before 59½ is subject to the 10% early withdrawal penalty. That penalty doesn't apply to inherited IRA distributions.

Option 2: Keep It as an Inherited IRA

You open an inherited IRA in your name, titled as a beneficiary. You don't treat it as your own.

When this makes sense: You're under 59½ and need access to the funds. Distributions from an inherited IRA are not subject to the 10% early withdrawal penalty, regardless of your age.

You can still switch to Option 1 later. But once you treat the IRA as your own, you can't go back.

RMD rules for this option depend on the deceased's age:

• If the deceased had already started RMDs (died on or after their required beginning date), you must take annual distributions using either your own life expectancy or the deceased's remaining life expectancy, whichever gives you smaller required withdrawals.
• If the deceased had not started RMDs, you can delay distributions until the year the deceased would have reached RMD age.

Option 3: Elect the 10-Year Rule

Surviving spouses can also choose the 10-year distribution method. You must empty the account by December 31 of the 10th year after the original owner's death.

When this makes sense: Rarely, but it could work if you want to deplete the account quickly for estate planning reasons or expect to be in a lower tax bracket for the next several years.

Eligible Designated Beneficiaries: The Life Expectancy Stretch

If you qualify as an EDB, you can still stretch distributions over your own life expectancy using the IRS Single Life Expectancy Table. This is the closest thing to the old stretch IRA that still exists.

Annual RMDs are calculated by dividing the account balance as of December 31 of the prior year by your life expectancy factor. Each year, the factor decreases by one.

Minor Children

Minor children of the deceased can stretch until they reach the age of majority (21 under federal rules). At age 21, the 10-year clock starts. The account must be emptied by December 31 of the 10th year after reaching age 21.

This means a child who inherits at birth has until age 31 to fully deplete the account. A child who inherits at age 15 has until age 31 as well.

Disabled and Chronically Ill

These beneficiaries can stretch over their own life expectancy for as long as they remain eligible. The IRS definitions are strict. Disability means a physical or mental condition that prevents any substantial gainful activity, expected to be long-lasting or result in death. Chronically ill means unable to perform at least two activities of daily living for at least 90 days, or requiring substantial supervision due to cognitive impairment.

Not More Than 10 Years Younger

If you're within 10 years of the deceased's age (or older), you qualify as an EDB and can stretch. A 55-year-old inheriting from a 60-year-old qualifies. A 45-year-old inheriting from a 60-year-old does not.

This category is commonly overlooked but covers siblings, partners, and close friends who are roughly the same age as the deceased.

Designated Beneficiaries: The 10-Year Rule

This is where most adult children and other non-spouse, non-EDB beneficiaries land. The rules are straightforward in concept but the details matter.

The Basic Rule

You must withdraw the entire balance of the inherited IRA by December 31 of the 10th year following the year of the original owner's death. The 10-year clock starts on January 1 of the year after the death.

If the owner died in 2025, the account must be empty by December 31, 2035.

Annual RMDs: It Depends on When the Owner Died

This is the part that confused everyone for years and led to the IRS waiving penalties from 2021 through 2024.

If the original owner died BEFORE their required beginning date (before they had to start taking RMDs):

You have flexibility. No annual RMDs are required during the 10-year window. You can take nothing for 9 years and withdraw everything in year 10. You can spread it out evenly. You can take it all in year 1. Your choice. The only hard deadline is that the account is empty by the end of year 10.

If the original owner died ON or AFTER their required beginning date (they had already started taking RMDs, or were required to):

You must take annual RMDs in years 1 through 9, based on your own life expectancy using the IRS Single Life Expectancy Table. Whatever is left must be withdrawn by the end of year 10.

The Grace Period Is Over

From 2021 through 2024, the IRS waived the penalty for missed annual RMDs on inherited IRAs subject to the 10-year rule. That grace period ended. Starting in 2025, if you're required to take an annual RMD and you don't, the penalty is 25% of the amount you should have withdrawn. Correct it within two years and file Form 5329, and the penalty drops to 10%.

If you inherited an IRA in 2020, 2021, 2022, 2023, or 2024 and haven't been taking annual RMDs, check whether you were required to. If the original owner had already started RMDs, you should have been taking them. You don't need to go back and take the missed ones from the waiver years. But you do need to start now.

Strategic Withdrawal Planning

Just because you can wait until year 10 doesn't mean you should. Withdrawing the entire balance in a single year is almost always a terrible tax strategy. That lump sum gets added to your ordinary income for the year. Depending on the account size, it could push you into a much higher bracket.

The smarter approach is to plan withdrawals across the 10-year window to stay within your current tax bracket. Take more in lower-income years. Take less in higher-income years. The 10-year window gives you flexibility. Use it.

Consider the downstream effects too. A large withdrawal can trigger IRMAA surcharges on Medicare premiums, phase out other deductions and credits, and increase the taxable portion of Social Security benefits.

Traditional IRA vs. Roth IRA: Does It Matter?

Yes. The type of IRA you inherit changes the tax treatment of your distributions.

Inherited Traditional IRA

Distributions are taxed as ordinary income. Every dollar you withdraw gets added to your taxable income for the year. This is true regardless of your beneficiary category. The 10-year rule, the life expectancy stretch, and lump-sum distributions all result in taxable income — the same tax treatment that applies to any Traditional IRA withdrawal.

The original owner got the tax deduction going in. You pay the tax coming out.

Inherited Roth IRA

Distributions are generally tax-free, provided the original owner's Roth IRA satisfied the 5-year rule (the account was open for at least 5 tax years before their death).

The 10-year rule still applies. You still have to empty the account within 10 years if you're a non-eligible designated beneficiary. But the withdrawals are tax-free.

Year-of-Death RMD

If the original owner died during a year in which they were required to take an RMD but hadn't yet taken it, the beneficiary must complete that year-of-death RMD. This is the deceased's RMD for the year they died — not yours.

It's calculated as if the original owner were still alive, using their age and the applicable life expectancy table. It must be taken by December 31 of the year of death.

If there are multiple beneficiaries, this responsibility is split proportionally based on each person's share of the account.

Splitting an Inherited IRA

If an IRA has multiple beneficiaries, the account can (and usually should) be split into separate inherited IRAs for each beneficiary. The deadline for splitting is December 31 of the year following the year of the original owner's death.

Why this matters: each beneficiary's RMD is calculated based on their own life expectancy. If one beneficiary is an EDB and another is a non-eligible designated beneficiary, they have different distribution rules. Without separate accounts, the most restrictive rule applies to everyone.

Splitting also allows each beneficiary to make their own investment and withdrawal decisions independently.

Titling the Account

An inherited IRA must be titled correctly. The standard format is:

[Deceased's Name], deceased, IRA FBO [Beneficiary's Name], beneficiary

The deceased's name stays on the account. This is not your IRA. It's an inherited IRA in your name as beneficiary.

Getting the title wrong doesn't change the tax rules, but it can cause confusion with custodians and the IRS.

Pre-2020 Inherited IRAs

If the original owner died before January 1, 2020, the old stretch rules still apply. These accounts are grandfathered. The SECURE Act does not retroactively change the distribution schedule for pre-2020 inherited IRAs.

If you've been stretching an inherited IRA under the old life expectancy rules, keep doing what you're doing. Annual RMDs continue based on your life expectancy, recalculated each year (or reduced by one each year, depending on your beneficiary type).

Common Mistakes

Assuming You Can Wait Until Year 10

If the original owner had already started RMDs, you can't. The "at least as rapidly" rule requires annual distributions in years 1 through 9. Missing them triggers a 25% penalty (reducible to 10% with timely correction).

Not Checking Whether the Owner Had Started RMDs

The critical question is whether the original owner died before or after their required beginning date. This determines whether annual RMDs are required during the 10-year period. Many beneficiaries never ask this question. Their custodian may not volunteer the answer.

Missing the Year-of-Death RMD

If the owner died mid-year and hadn't taken their RMD for that year, you owe it. It's calculated based on the owner's age and account balance. Beneficiaries miss this regularly because the custodian may not proactively notify them.

Not Splitting the Account When There Are Multiple Beneficiaries

If one beneficiary qualifies as an EDB and another doesn't, failing to split means both are subject to the more restrictive rule. Split by December 31 of the year after death to preserve each beneficiary's own distribution schedule.

Rolling an Inherited IRA Into Your Own (When You Shouldn't)

Surviving spouses under 59½ who roll the inherited IRA into their own IRA lose penalty-free access to the money. Distributions from your own IRA before 59½ trigger the 10% early withdrawal penalty. Distributions from an inherited IRA don't. If you need the money before 59½, keep it as an inherited IRA.

Taking a Lump Sum in Year 10

For a Traditional inherited IRA with a large balance, withdrawing everything in a single year can be catastrophic. The entire amount becomes ordinary income. The tax bracket jump, Medicare premium surcharges, and lost deductions can eat 30–40% of the account or more. Spread it out.

Thinking Inherited Roth IRAs Have No Rules

Inherited Roth IRAs still have distribution requirements. The 10-year rule applies. You still must empty the account within 10 years. The distributions are tax-free (assuming the 5-year rule is met), but the timeline requirement is the same as a Traditional inherited IRA.

Contributing to an Inherited IRA

You can't. It's not your account. You cannot add money to an inherited IRA under any circumstances.

FAQ