Inheriting an IRA can be both a blessing and a tax puzzle. The SECURE Act (2019) and SECURE 2.0 Act (2022) dramatically changed the landscape for beneficiaries, especially non-spouses.
Below, we break down the inherited IRA rules for 2025, including the 10-year rule, RMD requirements, taxation of inherited IRAs, and charitable giving (QCD) opportunities.
Understanding the SECURE and SECURE 2.0 Acts
Before 2020, most beneficiaries could “stretch” IRA withdrawals over their lifetimes. That changed with the SECURE Act of 2019, which requires most heirs to deplete inherited IRAs within 10 years.
The SECURE 2.0 Act (2022) refined these rules, especially around Required Minimum Distributions (RMDs) and exceptions for Eligible Designated Beneficiaries (EDBs).
The 10-Year Rule for Non-Spouse Beneficiaries
If the original IRA owner died on or after January 1, 2020, most non-spouse beneficiaries must:
- Withdraw all funds from the inherited IRA by December 31 of the 10th year after the owner’s death.
- Follow this rule regardless of whether the IRA is traditional or Roth.
This rule eliminates the old “stretch IRA” strategy for most non-spouses.
Exceptions: Who Qualifies as an Eligible Designated Beneficiary (EDB)?
Some beneficiaries still qualify for lifetime RMDs under EDB rules. They include:
- Minor children of the deceased (until age 21)
- Disabled or chronically ill individuals (as defined by the IRS)
- Beneficiaries within 10 years of age of the deceased (such as siblings or partners)
EDBs can stretch distributions over their life expectancy, but only if the original owner died before their Required Beginning Date (RBD)—typically April 1 following age 73.
Annual RMDs for Certain Beneficiaries
The IRS distinguishes RMD rules based on when the original IRA owner died.
If the owner died after their RBD (age 73):
- Non-EDBs must take annual RMDs in years 1–9 based on their life expectancy.
- The account must be emptied by year 10.
If the owner died before their RBD:
- Non-EDBs do not need annual RMDs for years 1–9.
- The account must still be fully withdrawn by the end of year 10.
For EDBs:
- They may take lifetime RMDs, recalculated annually.
- When a minor turns 21, the 10-year rule begins.
How Inherited IRAs Are Taxed
Traditional Inherited IRAs
Withdrawals are taxed as ordinary income when taken.
- Any non-deductible contributions (rare) are excluded.
Roth Inherited IRAs
Distributions are usually tax-free if the Roth IRA has been open for five years or more (counting both the owner’s and the heir’s time).
- The 10-year rule still applies.
- No 10% early withdrawal penalty applies—no matter the beneficiary’s age.
Charitable Giving Through Inherited IRAs: QCDs
Inherited IRAs can also support charitable giving through Qualified Charitable Distributions (QCDs).
QCD Highlights
Available to beneficiaries age 70½ or older
- Limit: Up to $111,000 per person in 2026 (indexed for inflation)
- Transfer must go directly from the IRA custodian to a qualified 501(c)(3) charity
- Excludes the amount from taxable income and can satisfy RMDs
Starting in 2026, a new 0.5% AGI floor for itemized deductions (under OBBBA) makes QCDs even more tax-efficient, as they avoid AGI increases altogether.
Special Inherited IRA Situations
Non-Designated Beneficiaries
Includes estates and non-qualifying trusts:
- If the owner died before RBD → 5-year rule applies.
- If after RBD → Use the owner’s remaining life expectancy.
Spousal Beneficiaries
Spouses can:
- Treat the IRA as their own (rollover option), or
- Use EDB rules to take distributions over life expectancy or the 10-year rule.
Minor Beneficiaries
Once the child turns 21, the 10-year withdrawal window begins, regardless of prior RMDs.
How to Manage an Inherited IRA
- Open a properly titled inherited IRA (e.g., “John Doe, deceased, for benefit of Jane Doe”).
- Ensure a direct transfer to avoid accidental taxation.
- Track your withdrawal deadlines carefully.
- For QCDs, instruct your custodian to send funds directly to the charity.
- Report correctly on Form 1040, using “QCD” for tax-free charitable transfers.
Penalties and Common Mistakes
- Missed RMDs: 25% penalty on the shortfall (10% if corrected promptly).
- QCD caveat: Reduces taxable income but not your RMD balance.
- Deductible IRA contributions after 70½ may reduce QCD eligibility.
Always consult a tax advisor or estate planning professional — especially if the IRA has multiple or trust beneficiaries.
The Bottom Line
The SECURE 2.0 Act modernized IRA inheritance rules but also added complexity. Understanding the 10-year rule, RMD timing, and QCD opportunities is crucial to avoid costly penalties and maximize your tax efficiency.
By planning carefully, you can honor your loved one’s legacy while managing taxes and even supporting charitable causes through your inherited IRA.
🔗 Related Articles
- QCD Rules 2025: How to Donate from an IRA Tax-Free
- SECURE 2.0 Act: Key Retirement and RMD Updates
- Inherited Roth IRA Withdrawal Rules Explained
Frequently Asked Questions (FAQs)
What is the 10-year rule for inherited IRAs?
Most non-spouse beneficiaries must withdraw the entire balance of an inherited IRA within 10 years of the original owner’s death.
Are inherited Roth IRAs tax-free?
Yes, if the Roth account was open for at least 5 years, withdrawals are generally tax-free. However, the 10-year withdrawal rule still applies.
Do I have to take annual RMDs from an inherited IRA?
It depends. If the owner died after starting RMDs (after their RBD), you must take annual RMDs in years 1–9 and deplete the account by year 10.
Can I donate from an inherited IRA to charity?
Yes. If you are 70½ or older, you can make Qualified Charitable Distributions (QCDs) of up to $111,000 in 2026 directly to a qualified charity.
What happens if I miss an inherited IRA RMD?
A 25% IRS penalty applies to the missed amount, reduced to 10% if corrected quickly. Always verify deadlines with your custodian or tax advisor.
🔗 Authoritative References for Inherited IRA Rules (2025)
🏛️ Primary Legal & IRS Sources
- IRS Publication 590-B (Distributions from Individual Retirement Arrangements)
🔗 https://www.irs.gov/publications/p590b
→ This is the official IRS publication explaining RMDs, inherited IRA rules, and the 10-year rule. - IRS Notice 2024-35 (Inherited IRA RMD Relief)
🔗 https://www.irs.gov/pub/irs-drop/n-24-35.pdf
→ Official IRS guidance confirming continued RMD relief for certain inherited IRAs through 2024. - SECURE Act of 2019 (Public Law No. 116-94)
🔗 https://www.congress.gov/bill/116th-congress/house-bill/1865
→ The law that first introduced the 10-year rule and eliminated most stretch IRAs. - SECURE 2.0 Act of 2022 (Division T of Consolidated Appropriations Act, 2023)
🔗 https://www.congress.gov/bill/117th-congress/house-bill/2617
→ Updates RMD age to 73, modifies inherited IRA rules, and expands charitable provisions.
Connecticut Capital Management Group, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
