So You’ve Inherited an IRA

June 26, 2025

Understanding Inherited Retirement Accounts

When you inherit a retirement account, it is important to understand the rules that apply. A required minimum distribution (RMD) is the amount the IRS mandates to be distributed from an individual retirement account (IRA) or other retirement account on an annual basis. The IRS requires retirement account distributions in order to collect taxes on funds that were saved on a tax-deferred basis. Such retirement account distributions are typically subject to taxation at ordinary income tax rates. The primary factors that determine whether an RMD must be taken from the account, as well as the timing and requirements, are as follows:

the date the account holder passed away,
whether the account holder passed away before or after their required beginning date,¹
the beneficiary’s relation to the deceased account owner, and
the type of retirement account

The SECURE Act, passed in December 2019, provided significant changes to the distribution requirements of retirement plans, but only for retirement account owners who pass away on or after January 1, 2020.² The content below is divided into two sections, differentiating the rules for beneficiaries inherited “Pre-SECURE” (death of an owner on or before December 31, 2019) and “Post-SECURE” (death of an owner on or after January 1, 2020).

To learn about taking RMDs from your own retirement account, review our Frequently Asked Questions About RMDs.

The following is a summary of the general rules; however, the law is so complex in this area that guidance from a CPA or attorney is required. Beacon Pointe Advisors does not offer tax or legal advice. Under limited circumstances, Beacon Pointe Advisors will calculate RMDs for retirement accounts.

Rules for ALL Inherited Retirement Accounts

Calculating an RMD If you must take an RMD from an inherited IRA, the RMD will be calculated by dividing the prior year- end account balance by a payout period based on a certain life expectancy. The IRS provides three life expectancy tables, the proper use of which will vary based on circumstance. Whether calculating the RMD for your own IRA or an IRA inherited from a loved one, please work with your tax advisor to ensure you utilize the correct tables.

Year-of-Death RMD If the account owner passed away before they were required to take RMDs, there is no RMD in the year of death. However, if the account owner passed away after they were required to take RMDs, and the decedent had not withdrawn the entire RMD, the beneficiary must take the remaining RMD in the year of death. The beneficiary is liable for the tax on any year-of-death remaining RMD.

No Early Withdrawal Penalties There are no early withdrawal penalties for distributions to beneficiaries under age 59½.

Penalties for Failing to Withdraw an RMD We recommend working with your CPA to confirm the correct RMD amount, as missed RMDs may be subject to a 25% excise tax, or 10% if timely corrected.³

Multiple Beneficiaries Separate inherited IRAs must be established for each beneficiary by December 31 of the year following the year of death. Otherwise, distributions may be based on the least flexible distribution option. Note that special rules may apply when multiple beneficiaries inherit their share of an IRA through an estate or a single trust named as beneficiary, so a discussion with your estate attorney is required.

Death of a Beneficiary of an Inherited IRA The rules below relate to the original beneficiary of an inherited IRA. When such an initial beneficiary of an IRA passes away, if any assets remain, there are additional rules to consider for the subsequent beneficiary. Contact your tax or legal advisor to determine the applicable rules in each situation.

Pre-SECURE Act, Inherited IRAs, and Stretch IRAs: Death of Account Owner on or before 12/31/19

Beneficiary is a Spouse As the surviving spouse, you likely elected one of two options: (1) treat the inherited account as your own by rolling it over to your own IRA, or (2) roll the account into an inherited IRA (also called a Beneficiary IRA).

If you rolled your spouse’s retirement account to your own IRA, you became the “owner” of the plan, in contrast to the beneficiary. Click here for the general FAQs about RMDs.

If you rolled your spouse’s retirement account into an inherited IRA You elected to be treated under rules set for spousal beneficiaries. RMDs must begin the later of the year after the deceased spouse’s death or the year in which the decedent would have been required to take RMDs (i.e., age 70 ½ for deaths before 2020). Once RMDs begin, you generally must calculate the RMD for years after the year of the owner’s death using the Single Life Expectancy Table for your age at the year- end following the year of the decedent’s death. The RMDs are recalculated annually based on your age each year.

Beneficiary is an Individual If you are a non-spouse beneficiary, you would have been required to roll the account to an inherited IRA (also called a Beneficiary IRA) by the end of the year after the account owner’s death.

Account owner died on or before they were required to begin taking RMDs Your RMDs would have started the year after the year of the account owner’s death. You generally must base the RMD for years after the year of the owner’s death using the Single Life Expectancy Table for your age at the year-end following the year of the decedent’s death and reducing the beginning life expectancy by one for each subsequent year. Some qualified plan provisions may have required an individual designated beneficiary to take the entire account by the end of the fifth year following the year of the owner’s death.

Account owner died on or after they were required to begin taking RMDs Your RMDs would have started the year following the account owner’s death. The annual distributions can be stretched over the longer of your life expectancy or the deceased owner’s life expectancy. Once the RMD is calculated for the first year after the deceased owner’s death, you reduce the beginning life expectancy (of the older of the beneficiary or deceased owner) by one for each subsequent year.

Beneficiary is not an Individual (e.g., an estate, charity, or some trusts).

Account owner died on or before they were required to begin taking RMDs The entity must take the entire account balance by the end of the fifth year following the year of death. There are no RMDs during the five-year period.

Account owner died on or after they were required to begin taking RMDs The entity generally must base the RMD on the account owner’s death using the Single Life Expectancy Table for the decedent’s age as of their birthday in the year of death and reducing the beginning life expectancy by one for each subsequent year.

Note on Trusts Some trusts qualify as “see-through” trusts, as they “see-through” to the underlying beneficiary. The RMD rules are based on the rules for individual beneficiaries applied to the current income beneficiaries. Other trusts do not qualify for this exception and will follow the RMD rules for a non-individual beneficiary. If you are the trustee of a trust that is the beneficiary of an inherited IRA, contact your estate attorney to confirm the RMD rules.

Post-SECURE Act, Inherited IRAs: Death of Account Owner on or after 01/01/20

In contrast to beneficiaries who inherited retirement accounts before 2020, most non-spouse beneficiaries who inherit accounts in 2020 or later must fully distribute the account by the end of the tenth year following the account owner’s passing. If the original account owner had already reached their required beginning date for RMDs, annual distributions are generally also required during years one through nine of that 10-year period. Certain beneficiaries, defined below as Eligible Designated Beneficiaries, may qualify for more flexible distribution options similar to the “Stretch IRA” rules that applied before the SECURE Act.

Non-Eligible Designated Beneficiaries

Death before they were required to begin taking RMDs Most individual beneficiaries must withdraw the entire account value by the end of the 10th anniversary year of the account owner’s death (the “10-year rule”). There are no RMDs over this term.

Death on or after they were required to begin taking RMDs Most individual beneficiaries must take annual RMDs during years one through nine and must withdraw the entire account value by the end of the 10th year following the account owner’s death. The annual RMDs are generally calculated using IRS life expectancy tables, but the applicable factor can vary based on the beneficiary’s age, the account owner’s age, and the type of beneficiary. Beneficiaries should work with their tax or legal advisor to confirm the correct calculation. Eligible Designated Beneficiaries – Exceptions to the New Rules

The SECURE Act provides that certain beneficiaries may qualify as “Eligible Designated Beneficiaries” (EDBs) and may qualify for more flexible distribution options than most non-spouse beneficiaries. Status as an EDB is determined at the date of the owner’s death and cannot be changed. EDBs include the following categories:

Surviving Spouses As the surviving spouse, you will likely elect either (1) to roll the decedent’s IRA into your own IRA, following the traditional rules as an IRA owner rather than the beneficiary, or (2) to roll into an inherited IRA (also called a Beneficiary IRA), following the rules below as an EDB.

If roll to your own IRA You became the “owner” of the plan, in contrast to the beneficiary. Click here for the general FAQs about RMDs.

If roll to an inherited IRA You elected to be treated under rules set for spousal beneficiaries. RMDs must begin the year after the deceased spouse’s death or the year in which the decedent would have been required to take RMDs based on their year of birth, whichever is later. Once RMDs begin, RMDs are based on the longer of your life or the decedent’s life expectancy, whichever is longer. Alternatively, the surviving spouse may also elect to distribute the assets based on the 10-year rule described above.

Minor Children If the account owner’s child-beneficiary is a minor at the time of the owner’s death, the child must take annual RMDs based on the minor child’s life expectancy until reaching age 21. Then, the ten-year period begins, and the entire account must be paid out by the end of the year that contains the minor’s 31st birthday or by the 10th anniversary of the minor’s death if the minor passes away before reaching age 21. Note that non-child minor beneficiaries do not qualify as EDBs and are still subject to the 10-year rule.

Beneficiaries Not More Than 10 Years Younger, Disabled and/or Chronically Ill If you qualify under these three exceptions, you must take RMDs beginning the year after the year of the account owner’s death. The RMDs are based on your life expectancy or the decedent’s life expectancy, if longer. Note that status of these exceptions is determined at the time of death; if you become disabled or chronically ill after an owner’s death, you will not be considered an EDB.

Inherited Roth IRAs

Inherited Roth IRAs generally follow the same beneficiary classification rules described above. However, because original Roth IRA owners are not subject to lifetime RMDs, they are treated as having passed away before their required beginning date. Most non-spouse beneficiaries must withdraw all assets from an inherited Roth IRA by the end of the 10th year following the account owner’s passing. Annual RMDs are generally not required during the 10-year period for non-eligible designated beneficiaries.

Inherited Employer-Sponsored Retirement Plans (e.g., 401(k)s)

The terms vary by company and by the plan. Beneficiaries should confirm the plan’s distribution rules, available rollover options, and deadlines with the plan administrator. Many individual beneficiaries may be able to roll inherited employer-sponsored retirement plan assets into an inherited IRA for simplicity and ease of investing, but this should be reviewed with a tax advisor before taking action.

Beneficiary is not an Individual (e.g., estate, charity, or some trusts)

Similar rules apply as pre-SECURE Act. If you are the trustee of a trust that is the beneficiary of an inherited IRA, contact your estate attorney to confirm the RMD rules.

¹ The date by which the participant must commence taking lifetime RMDs from the retirement account. SECURE 1.0 increased the age to 72 from 70 ½, beginning in 2020. With the passage of SECURE 2.0, the new required beginning date for RMDs is increased to 73 for individuals born in 1951 through 1959 and age 75 for individuals born in 1960 or later.

² The effective date is extended for two years for certain governmental plans, and will apply to account owners of such plans that pass away before 12/31/2023.

³ Effective for RMDs required in 2023 and beyond, the penalty on missed RMDs is reduced to 25%. For RMDs required before 2023, the penalty is 50%.

Important Disclosure: Beacon Pointe Advisors does not offer legal or tax advice. Please consult with the appropriate tax or legal professional regarding your circumstances. This information is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Only a tax or legal professional may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement any design discussed herein. Nothing herein should be relied upon as personalized investment advice, nor should it be considered an individualized recommendation, offer or solicitation for the purchase or sale of any security or to adopt a specific investment strategy. An investor should consult with their financial professional before making any investment decisions. Beacon Pointe provides links for your convenience to other providers’ websites. Beacon Pointe is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve or endorse the information provided.