Direct Answer
An inherited traditional IRA (also called a beneficiary IRA) is held by a beneficiary who inherits IRA assets from a deceased owner. Under the SECURE Act (for deaths on or after January 1, 2020), most non-spouse beneficiaries must empty the account within 10 years. If the decedent was past their required beginning date, annual RMDs are also required in years 1-9. Surviving spouses may roll over the account as their own, avoiding the 10-year rule.
Inherited Traditional IRA Profile: 10-Year Rule, RMDs and SECURE 2.0
Beneficiary Categories and Distribution Rules
| Beneficiary Type | Distribution Rule |
|---|---|
| Surviving spouse | Life expectancy (stretch) OR rollover to own IRA |
| Eligible designated beneficiary (EDB) | Life expectancy (stretch) method |
| Minor child of owner (EDB until age 21) | Life expectancy until 21; then 10-year rule |
| Non-EDB (adult children, most others) | 10-year rule (empty by end of year 10) |
| Non-EDB with decedent past RBD | 10-year rule + annual RMDs in years 1-9 |
EDB categories: surviving spouse, minor child of decedent (not grandchild), disabled individual (IRC Section 72(m)(7)), chronically ill individual, individual not more than 10 years younger than the decedent. These rules apply to deaths on or after January 1, 2020 (SECURE Act). Prior inherited IRAs may use different rules. Source: SECURE Act of 2019; IRS Final Regulations (2024).
The 10-Year Rule in Detail
Under the 10-year rule, the entire inherited IRA balance must be distributed by December 31 of the 10th anniversary of the IRA owner's death. There is no required annual distribution schedule within years 1-9, UNLESS the decedent had reached their required beginning date (RBD) before death.
When decedent was past RBD: Annual RMDs based on the beneficiary's life expectancy (using IRS Uniform Lifetime Table or Single Life Table) are required in each of years 1 through 9. The remaining balance must be distributed in year 10. Failure to take required annual RMDs results in a 25% excise tax on the shortfall (reduced to 10% if corrected timely).
When decedent was before RBD: No annual RMDs required in years 1-9. The beneficiary may take distributions in any amount, at any time, provided the account is emptied by the year 10 deadline.
RBD for these purposes: For deaths in 2023 or later, the decedent's RBD was April 1 of the year after they turn 73 (or 75 for those born 1960 or later, effective after 2033). For deaths in 2020-2022, the decedent's RBD was April 1 after age 72.
Surviving Spouse Options
A surviving spouse inheriting a Traditional IRA has three options:
- Roll over to own Traditional IRA: Treat the inherited IRA as their own. RMDs start at age 73/75. No early distribution penalty applies on withdrawals if the spouse is 59½ or older. Best when the surviving spouse doesn't need immediate distributions.
- Remain as beneficiary (life expectancy method): Allows distributions from the inherited account without the 10% early withdrawal penalty (regardless of age). Useful if the surviving spouse is younger than 59½ and needs early access to funds.
- Lump-sum distribution: Take the entire balance at once. Subject to ordinary income tax in the year distributed; generally not optimal for large balances.
Frequently Asked Questions
- What is the 10-year rule for an inherited traditional IRA?
- Under the SECURE Act (deaths on or after January 1, 2020), most non-spouse beneficiaries must empty the inherited IRA by December 31 of the 10th year after the owner's death. If the decedent was past their required beginning date, annual RMDs are also required in years 1-9 using the beneficiary's life expectancy. If before RBD, no annual RMDs are required but the account must be emptied by year 10. Source: SECURE Act of 2019; IRS Final Regulations (2024).
- Who qualifies as an eligible designated beneficiary and avoids the 10-year rule?
- Eligible designated beneficiaries (EDBs) may use the life expectancy (stretch) method: surviving spouses, minor children of the owner (until age 21), disabled individuals (IRC Section 72(m)(7)), chronically ill individuals, and individuals not more than 10 years younger than the decedent. All other beneficiaries (adult children, grandchildren, most trusts) are subject to the 10-year rule.
- Can a spouse roll over an inherited traditional IRA?
- Yes. A surviving spouse may roll the inherited IRA into their own Traditional IRA, deferring RMDs until their own RBD (age 73 or 75). Alternatively, remaining as a beneficiary allows penalty-free distributions at any age, which may be advantageous if the spouse is under 59½ and needs early access to funds.