Inherited IRA Rules After the SECURE Act

The SECURE Act of 2019 ended the lifetime "stretch IRA" for most non-spouse beneficiaries. Inherited IRAs now generally must be emptied within 10 years. The July 2024 final regulations added a wrinkle that surprised many beneficiaries: annual RMDs are required during the 10-year window if the original owner had already begun taking RMDs.

The 10-year rule, in plain English

For IRA owners who died after December 31, 2019, the inherited IRA must be fully distributed by December 31 of the tenth year following death. The rule applies to Traditional, Roth, SEP, SIMPLE, and inherited 401(k) accounts.

"Fully distributed" means $0 by year 10. How you draw it down within the 10 years is largely up to you — except in one important case.

When annual RMDs are also required

Treas. Reg. §1.401(a)(9)-5(d), finalized July 19, 2024, holds that:

• If the deceased owner had already begun taking RMDs (i.e., was past their required beginning date), the beneficiary must take annual RMDs in years 1 through 9 and empty the account by year 10.
• If the owner died before their required beginning date, no annual RMDs are required during the 10-year window — just the year-10 deadline.

The IRS waived enforcement of the annual RMDs for 2021–2024 (Notice 2024-35 was the last in a series of waivers). The waivers are gone for 2025. Miss an annual RMD now and the excise tax under IRC §4974 applies — 25%, or 10% if cured within two years.

The five eligible designated beneficiaries (EDBs)

SECURE Act §401 created a class of beneficiaries who escape the 10-year rule and can use a lifetime stretch:

1. The surviving spouse. A spouse can roll the IRA into her own IRA (the "spousal rollover" under §408(d)(3)(C)) or treat it as an inherited IRA. The rollover option is almost always better — it converts the spouse's status from beneficiary to owner.
2. A minor child of the decedent. Stretch applies until the child reaches the age of majority (21 under the final regs), at which point the 10-year clock starts.
3. A disabled beneficiary. Disabled as defined under IRC §72(m)(7).
4. A chronically ill beneficiary. Chronic illness as defined under IRC §7702B(c)(2).
5. An individual not more than 10 years younger than the decedent. Typically a sibling, partner, or close-age friend.

Trust beneficiaries

Naming a trust as IRA beneficiary is a planning move with sharp edges. A "see-through" trust meeting the four conditions of Treas. Reg. §1.401(a)(9)-4(f) can preserve EDB stretch status for an EDB trust beneficiary. A standard accumulation trust generally forces the entire 10-year payout to be received by the trust, taxed at compressed trust rates (the 37% top bracket starts at about $15,200 of trust income in 2025). For a $1M inherited IRA paid into an accumulation trust over 10 years, the trust-rate tax can exceed the individual-rate tax by hundreds of thousands of dollars. See our trust-as-IRA-beneficiary article.

Common mistakes

• Spouse treating inherited IRA as inherited rather than rolling over. A spousal rollover puts the IRA in the spouse's name, deferring RMDs to her own start age. The inherited-IRA route accelerates them.
• Skipping annual RMDs in 2025. If the owner died after their RBD, the annual-RMD requirement is back in force. The IRS's enforcement waiver is over.
• Treating year 1 of the 10-year window as flexible. The clock starts the year following death. Beneficiaries who wait until year 9 to start withdrawing can blow through three or four tax brackets.
• Naming a minor child without a UTMA or trust. Custodial accounts handle the IRA until majority; without one, the funds may be held by a court-appointed guardian.

Sources

• SECURE Act of 2019 §401, "stretch IRA" replaced by 10-year rule. Pub. L. 116-94: congress.gov/bill/116th-congress/house-bill/1865
• Final RMD regulations, T.D. 9999, published July 19, 2024: federalregister.gov/documents/2024/07/19/2024-14542
• IRS Notice 2024-35, final enforcement waiver for 2024 inherited-IRA RMDs: irs.gov/pub/irs-drop/n-24-35.pdf
• Internal Revenue Code §401(a)(9), required distributions (Cornell LII): law.cornell.edu/uscode/text/26/401
• IRS Publication 590-B, Distributions from IRAs: irs.gov/forms-pubs/about-publication-590-b

If you have inherited an IRA, RetirementCheck101 helps you size the 10-year drawdown so it does not blow up your bracket. Explore the free educational tool.