If you inherited an IRA from a parent, spouse, or loved one after January 1, 2020, the rules changed significantly, and many beneficiaries have no idea.
The IRS finalized regulations in 2024 that clarified a critical point: if the original IRA owner had already begun taking Required Minimum Distributions (RMDs) before they died, you as a non-spouse beneficiary must now take annual distributions during the 10-year window, and the penalty for missing one is 25% of the amount not withdrawn.
The IRS waived this penalty for tax years 2021 through 2024 while the rules were being clarified. That grace period is over. Starting in 2025, the clock is running, and in 2026, we are now mid-window for every family that inherited an IRA in 2020, 2021, 2022, or 2023.
Many of those families did not take a distribution in 2025 because they were not aware it was required. If that is your situation, you may be facing a 25% excise tax penalty but there is a correction process that can reduce it to 10% if handled promptly.
As both an estate planning attorney and financial advisor who has navigated these rules with families across CT, NY, and all over the country for over 30 years, I want to make sure you understand exactly what the 10-year rule requires, who it applies to, and what you need to do right now.
Before 2020, beneficiaries who inherited an IRA had a powerful planning tool called the ‘stretch IRA.’ They could take Required Minimum Distributions spread over their own life expectancy, sometimes over decades, allowing the account to continue growing tax-deferred while minimizing the annual tax hit.
Congress eliminated this for most non-spouse beneficiaries in the SECURE Act of 2019. For any IRA inherited after December 31, 2019, most adult beneficiaries must empty the entire account within 10 years of the original owner’s death.
That sounds straightforward. It is not. Because the IRS then spent four years debating whether beneficiaries had to take distributions every year during those 10 years, or whether they could simply wait and drain the account in year 10. The answer, finalized in 2024, depends on one key fact: whether the original owner had reached their Required Beginning Date (RBD) for RMDs before they died.
Your obligations depend entirely on the age and RMD status of the person you inherited from. Here is the breakdown.
| Inherited | Owner Died | Annual RMDs Required? | Must Empty By |
| After 2019 | Before RMD age (died before age 73) | NO, flexible timing within 10 years | Dec 31 of 10th year after death |
| After 2019 | After RMD age (died at 73 or older) | YES, annual RMDs required years 1-9 | Dec 31 of 10th year after death |
| Before 2020 | Any age | OLD rules – stretch over life expectancy | Based on life expectancy table |
| Spouse inheriting | Any age | Special rules – multiple options | Spouse has unique flexibility |
| Source: IRS Final Regulations (July 2024), IRS Publication 590-B (2025), Fidelity Investments. RMD age is 73 for individuals born 1951-1959. It increases to 75 starting in 2033 for those born in 1960 or later. The 25% penalty applies to the amount not distributed as required. Quick correction may reduce this to 10%. |
The scenario that surprises people most: a parent who was 75 and had already started taking RMDs dies and leaves an IRA to an adult child. The child assumed they just had 10 years to drain the account at their own pace. Under the 2024 IRS final regulations, that is wrong. Annual distributions were required starting the year after the parent died, and the IRS is now enforcing the penalty.
This is not a technicality. A $500,000 inherited IRA with no distributions taken in 2025 means a potential missed RMD amount that could trigger a five-figure penalty, plus the need to catch up on distributions in 2026.
If you know what year you inherited the account, here is exactly where you stand in 2026.
| Year Inherited | If Owner Was Past RMD Age | Annual RMDs Required In | Full Account Empty By |
| 2020 | Annual RMDs required 2021 onward | 2021, 2022, 2023, 2024, 2025, 2026… | December 31, 2030 |
| 2021 | Annual RMDs required 2022 onward | 2022, 2023, 2024, 2025, 2026… | December 31, 2031 |
| 2022 | Annual RMDs required 2023 onward | 2023, 2024, 2025, 2026… | December 31, 2032 |
| 2023 | Annual RMDs required 2024 onward | 2024, 2025, 2026… | December 31, 2033 |
| 2024 | Annual RMDs required 2025 onward | 2025, 2026… | December 31, 2034 |
| 2025 | Annual RMDs required 2026 onward | 2026 is your first required year | December 31, 2035 |
| IMPORTANT: The IRS waived penalties for missed RMDs in 2021-2024. That waiver is over. If you did not take a required distribution in 2025, you may face a 25% penalty on the missed amount. Correcting quickly (taking the missed amount now) may reduce the penalty to 10%. Consult a tax advisor before taking any catch-up distribution. |
| Inherited an IRA and Not Sure Where You Stand? John F. Davenport, Esq. and Davenport & Associates helps CT, NY, and families across the country navigate inherited IRA rules, minimize the tax hit, and coordinate distributions with their overall financial plan. Free 15-minute consultation. -> Schedule a Free Review -> jdavenportassociates.com/contact-us |
Not everyone who inherits an IRA is subject to the 10-year rule. There is a category of beneficiaries called Eligible Designated Beneficiaries (EDBs) who are exempt and can still stretch distributions over their own life expectancy.
EDBs include:
Everyone else, adult children, most grandchildren, siblings more than 10 years younger, other non-spouse individuals, trusts in many cases, and estates falls under the 10-year rule.
Here is the planning challenge that trips up families even when they know the rules: distributing a large traditional IRA over 10 years can push you into significantly higher tax brackets in each of those years.
Consider an adult child who earns $120,000 per year and inherits a $400,000 traditional IRA from a parent who had begun taking RMDs. If they take equal distributions over 10 years, that is $40,000 of additional ordinary income per year, potentially pushing them from the 22% bracket into the 24% or 32% bracket every year for a decade.
This is where the planning matters enormously. Strategies worth discussing with an advisor and tax professional:
The 10-year rule is not just a problem for beneficiaries today. It is a wake-up call for IRA owners right now who have not updated their estate plan since the SECURE Act.
Before 2020, many people named their children as IRA beneficiaries specifically to enable the stretch of decades of tax-deferred growth. That strategy no longer works for most adult children. The 10-year rule compresses a stretch that used to span 30+ years into 10.
If you have significant IRA assets and want to minimize the tax burden on your heirs, the conversation has shifted. Options worth exploring:
These are the questions I hear most consistently from families navigating an inherited IRA.
| Q: I inherited an IRA in 2021. Do I have to take a distribution in 2026? |
| It depends on whether the original owner had already started taking RMDs when they died. If they had reached RMD age (73) and were taking distributions, then yes, annual distributions were required starting in 2022, and 2026 is your fifth required distribution year. If the original owner died before reaching their Required Beginning Date, you have more flexibility on timing but must still empty the account by December 31, 2031. |
| Q: What is the penalty for missing a required distribution from an inherited IRA? |
| The excise tax for missing a required distribution from an inherited IRA is 25% of the amount that should have been distributed but was not. If you catch the error and correct it within the correction period (generally before the IRS issues a notice), the penalty may be reduced to 10%. This is a meaningful difference, on a $50,000 missed RMD, the difference is $12,500 versus $5,000. |
| Q: Did the IRS really waive inherited IRA penalties for several years? |
| Yes. Due to confusion about how the 10-year rule worked after the SECURE Act, the IRS issued relief notices in 2021, 2022, 2023, and 2024 that waived the missed RMD penalty for beneficiaries subject to the 10-year rule. That waiver ended after 2024. Starting with tax year 2025, the 25% penalty applies to missed distributions, and there is no indication the IRS will extend relief again. |
| Q: Does the 10-year rule apply to an inherited Roth IRA? |
| Yes. Non-spouse beneficiaries of inherited Roth IRAs are subject to the same 10-year distribution requirement. However, the tax treatment is very different, qualified distributions from an inherited Roth IRA are tax-free, provided the account was at least five years old when the original owner died. This means beneficiaries of inherited Roth IRAs often benefit from waiting as long as possible within the 10-year window to maximize tax-free growth. |
| Q: My spouse left me their IRA. Does the 10-year rule apply to me? |
| No, surviving spouses have more options than any other beneficiary. You can roll the inherited IRA into your own IRA, treating it as if you always owned it. That delays RMDs until you reach age 73. Alternatively, you can keep it as an inherited IRA and take distributions based on your own life expectancy. Neither option is subject to the 10-year mandatory depletion rule. |
| Q: I am named as beneficiary of an IRA held in a trust. What rules apply? |
| Trust-as-beneficiary situations are among the most complex under post-SECURE Act rules. Whether the 10-year rule applies depends on whether the trust qualifies as a ‘see-through’ trust under IRS rules, and the types of beneficiaries named in the trust. Non-qualifying trusts often face compressed payout schedules. If you are in this situation, do not try to determine the rules yourself, consult an estate planning attorney who specializes in inherited IRAs. |
| Q: Should I take the full inherited IRA in one year to simplify things? |
| Rarely. Taking the entire balance in year one generates a large spike in ordinary income that can push you into a significantly higher tax bracket. For a $300,000 or $500,000 IRA, this could mean tens of thousands of dollars in additional tax that spreading distributions over 10 years would have avoided. There are scenarios where front-loading makes sense, if you have significant losses that year, or if you need the funds immediately but it requires careful tax modeling first. |
The SECURE Act fundamentally changed what it means to inherit an IRA. The stretch that allowed previous generations to pass tax-deferred wealth across decades is gone for most beneficiaries. What replaced it is a 10-year window with annual distribution requirements that many families do not know about, and a 25% penalty for getting it wrong.
If you inherited an IRA after 2019, the first step is simply knowing which rules apply to you based on when you inherited and whether the original owner had started RMDs. The second step is building a distribution strategy that accounts for your own income, tax bracket, and other financial goals, not just taking the minimum required amount each year without thinking through the cumulative tax impact.
And if you are an IRA owner thinking about what you will leave behind, the SECURE Act is the single strongest argument for reviewing your beneficiary designations and considering Roth conversion planning while you still have time to shape the outcome for your heirs.
| Questions About Your Inherited IRA or Your Own IRA Strategy? Book a free 15-minute call with Davenport & Associates. We helps CT, NY, and retirees across the country navigate inherited IRA distributions, coordinate them with Roth conversion planning, and build tax-efficient strategies for both beneficiaries and IRA owners. -> Schedule Your Free Review -> jdavenportassociates.com/contact-us |
| References & Sources IRS Final Regulations on Inherited IRA 10-Year Rule, July 2024, IRS.gov IRS Publication 590-B (2025): Distributions from Individual Retirement Arrangements, IRS.gov IRS Retirement Topics, Beneficiary: irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary Fidelity Investments: Inherited IRA RMD rules and penalty enforcement, fidelity.com/retirement-ira/inherited-ira-rmd Vanguard: RMD Rules for IRA Beneficiaries, investor.vanguard.com Kiplinger: The IRS 10-Year Rule for Inherited IRAs, kiplinger.com, March 2026 SmartAsset: How the 10-Year RMD Rules Work for Inherited IRAs, smartasset.com Thomas Mamer LLP: Inherited IRA Rule Changes, What Owners and Heirs Need to Know, https://thomasmamer.com/inherited-ira-rule-changes-in-2025-what-owners-and-heirs-need-to-know-to-avoid-pitfalls/ |
| About the Author | John F. Davenport, Esq. John F. Davenport holds a law degree from Pace University, an MBA in finance from Fordham University and undergraduate degree from the University of Notre Dame. He is a licensed attorney in New York and Connecticut, and holds FINRA Series 6, 7, 63, and 65 licenses. He founded Davenport & Associates in 1997 and has spent more than 30 years helping CT and NY locally and families across the country build retirement income plans and estate strategies that work together, not against each other. Davenport & Associates is located at 800 Connecticut Avenue, Suite E401, Norwalk, CT 06854. Phone: (203) 853-6300 | jdavenportassociates.com IMPORTANT DISCLAIMER: Educational only—not investment/tax/legal advice. No strategy guarantees results—vary by rates, markets, laws, personal circumstances. Consult advisors. |