Inherited IRA 10-Year Rule — What Non-Spouse Beneficiaries Must Know Before They Miss Deadlines

What Is It?

The SECURE Act of 2019 fundamentally changed how non-spouse beneficiaries can inherit IRAs. Before 2020, most beneficiaries could “stretch” inherited IRA distributions over their entire lifetime — allowing decades of tax-deferred growth. Since 2020, most non-spouse beneficiaries must distribute the entire account within 10 years of the original owner’s death.

This change affects adult children who inherit from parents, siblings, friends, and most other non-spouse beneficiaries. The compressed timeline creates a significant tax planning challenge — and missing the 10-year deadline triggers a 25% excise tax on undistributed amounts.

The Two Categories: Eligible Designated Beneficiaries vs. Everyone Else

Eligible Designated Beneficiaries (EDBs) — Still Get the Lifetime Stretch

Certain beneficiaries are exempt from the 10-year rule and can still spread distributions over their life expectancy:

• Surviving spouse (most flexible — can also roll over the IRA or treat it as their own)
• Minor children of the original owner — but only until they reach the age of majority (18 in most states, or up to age 26 if still in school in some interpretations). After reaching majority, the 10-year rule kicks in from that point.
• Disabled individuals (as defined under IRC § 72(m)(7))
• Chronically ill individuals
• Individuals not more than 10 years younger than the original owner — e.g., an older sibling, a friend the same age

If you fall into one of these categories, you can use the Single Life Expectancy table to calculate your annual RMDs — the traditional stretch rule still applies.

The 10-Year Rule — Most Adult Beneficiaries

Adult children, grandchildren, siblings, friends, and other non-EDB beneficiaries must empty the inherited IRA by December 31 of the 10th year following the year of death. There is no required minimum distribution in any particular year within that 10-year period, with one important exception below.

Example: If the original owner died in 2023, the inherited IRA must be fully distributed by December 31, 2033.

The 2022 SECURE 2.0 Twist: Annual RMDs Within the 10 Years

The IRS issued controversial proposed regulations in 2022 (finalized in 2024) clarifying that if the original owner had already begun taking required minimum distributions (RMDs) before death, non-EDB beneficiaries must:

1. Take annual RMDs in years 1–9 (based on the beneficiary’s own life expectancy), AND
2. Distribute the remaining balance by the end of year 10

If the original owner had not yet started RMDs (died before their Required Beginning Date, generally April 1 of the year after turning 73), no annual distributions are required — the entire balance simply needs to be out by year 10, with complete flexibility about when.

The IRS waived penalties for missed RMDs from 2021–2024 while this rule was being finalized, but the annual RMD requirement is now in effect for 2025 and beyond for accounts where the original owner had started RMDs.

Do I Qualify as an EDB?

You are an Eligible Designated Beneficiary if you are:

• The surviving spouse of the original owner
• A minor child of the original owner (under 18/21)
• Diagnosed as disabled under IRS criteria
• Chronically ill
• Not more than 10 years younger than the original owner

If none of these apply, you fall under the 10-year rule.

Tax Planning: Bunching vs. Spreading Withdrawals

The 10-year rule creates an important tax planning decision: when within the 10 years do you take distributions?

Option A — Spread evenly: If your inherited IRA is $300,000, taking $30,000/year keeps you in a lower tax bracket and spreads tax impact over a decade.

Option B — Front-load in lower-income years: If you retire in year 2 and your income drops significantly, taking larger distributions in low-income years (e.g., before Social Security or pension begins) can reduce total taxes paid.

Option C — Back-load: Delay distributions to maximize tax-deferred growth. But be aware that if the original owner had started RMDs, annual distributions are required in years 1–9 regardless.

Key considerations:

• Inherited Roth IRA distributions are generally tax-free (original owner’s 5-year Roth rule must be satisfied). The 10-year rule still applies, but no income tax is owed on qualified distributions.
• Inherited traditional IRA distributions are ordinary income. Large distributions can push you into higher brackets, trigger IRMAA (Medicare premium surcharges), or increase the taxable portion of your Social Security.
• Work with a tax advisor to model projected income over the 10-year window.

What Most People Don’t Know

• Inherited Roth IRAs also must be distributed within 10 years for non-EDB beneficiaries — but since qualified distributions are tax-free, the strategy shifts to maximizing tax-free growth by waiting until year 10 to distribute.

• Trusts as beneficiaries have complex rules. If the IRA names a trust as beneficiary, the 10-year rule may apply to the trust, and the trust’s terms affect timing. See-through trust rules apply — consult an estate attorney.

• The 25% excise tax for missed distributions is lower than it used to be. SECURE 2.0 reduced it from 50% to 25% (and 10% if corrected promptly). Still, failing to distribute by year 10 is expensive.

Frequently Asked Questions

Sources

• IRS — Required Minimum Distributions for IRA Beneficiaries
• IRS Publication 590-B — Distributions from Individual Retirement Arrangements
• SECURE Act — Public Law 116-94
• IRS Final Regulations on SECURE Act RMD rules (2024)
• Fidelity — Inherited IRA RMD Rules