If you inherited an IRA in the past five years, the rules you’re operating under are not the rules your parents inherited under. Congress fundamentally rewrote the inherited-IRA system with the SECURE Act in 2019, and the IRS spent the next five years clarifying what the rewrite actually meant. The result is a regime that is meaningfully more restrictive than the old “stretch IRA” world — and meaningfully more punitive on the tax bill if you don’t plan around it.

This piece walks through the old rules, the new rules, the 2022-2024 IRS confusion that’s now resolved, the special cases (Roth IRAs, spouses, trusts), and the high-leverage planning angles. Whether you’ve already inherited or you’re naming beneficiaries on your own accounts and want to plan for them, the operating rules below are what apply.

The old rule: the “stretch IRA”

Before 2020, when a non-spouse inherited an IRA, the beneficiary could choose to “stretch” the inherited account over their own life expectancy. A 35-year-old who inherited from a parent could take small annual distributions over 50+ years, with the bulk of the inherited account growing tax-deferred for decades. Heirs paid tax only on what they withdrew, and the stretch IRA was one of the most powerful tax-deferred wealth-transfer vehicles in the code.

The stretch IRA had become a centerpiece of estate planning for moderate-to-affluent families. Naming children or grandchildren as beneficiaries of a Traditional IRA effectively created a multi-generation tax-deferred wealth-builder. Congress eventually decided this was generous beyond what the original Roth/Traditional architecture had intended — and changed it.

SECURE Act 1.0 (2019): the 10-year rule

The SECURE Act, signed in late 2019, eliminated the stretch IRA for most non-spouse beneficiaries effective for deaths on or after January 1, 2020. The replacement is the 10-year rule:

The entire inherited IRA balance must be withdrawn by December 31 of the 10th calendar year after the original owner’s death.

A simple example. A parent dies in March 2026. The non-spouse beneficiary inherits the IRA. The beneficiary’s deadline to fully empty the account is December 31, 2036. After that date, any remaining balance is subject to the 25%/50%-class penalty for missed RMDs (now reduced under SECURE 2.0 — see our RMDs piece).

The 10-year rule does not require equal annual distributions. The beneficiary can take any pattern of withdrawals they want — front-loaded, back-loaded, lump-sum, whatever — as long as the account is empty by year 10. (More on this below; the 2022-2024 IRS interpretation added an annual-RMD wrinkle that doesn’t apply to all inherited IRAs.)

The economic consequence is significant. A 35-year-old who would have stretched a $1 million inherited IRA over 50 years now has 10 years to withdraw and pay tax on the entire balance. If those 10 years overlap with the beneficiary’s peak earning years — common, since most beneficiaries inherit in their forties and fifties — the resulting forced withdrawals can stack on top of wage income and push the beneficiary into the highest marginal brackets for a decade.

Eligible Designated Beneficiaries (the exceptions)

The 10-year rule applies to most non-spouse beneficiaries, but Congress carved out a narrower category called Eligible Designated Beneficiaries (EDBs) who can still stretch:

  1. Surviving spouse — special status, see below
  2. Minor child of the decedent — can stretch until age of majority (generally 21 under federal law for this purpose, regardless of state law), at which point the 10-year clock starts
  3. Disabled individual (as defined under §72(m)(7) of the Internal Revenue Code)
  4. Chronically ill individual (as defined under §7702B(c)(2))
  5. Beneficiary not more than 10 years younger than the decedent — typically a sibling close in age

EDBs can use their life expectancy under the IRS Single Life Table for distributions, similar to the pre-SECURE stretch rules. The carve-outs are narrow by design — a non-spouse adult child, a friend, a niece, a charity, a trust without specific provisions — none of these qualify as EDBs.

A stepchild can be an EDB if they are a minor or disabled, but not by virtue of being a stepchild. A grandchild is generally not an EDB unless they are disabled, chronically ill, or close in age to the decedent (rare). The vast majority of non-spouse beneficiaries fall outside the EDB carve-outs and are stuck with the 10-year rule.

The 2022-2024 IRS confusion: are annual RMDs required during the 10 years?

When the SECURE Act passed, most practitioners read the 10-year rule the same way: empty by year 10, no annual minimum required in years 1-9. Withdraw any pattern that empties the account by the deadline.

In February 2022, the IRS issued proposed regulations that surprised everyone: if the original owner had already started RMDs before death, the beneficiary must continue annual RMDs in years 1-9 and empty the account by year 10. Two requirements stacked on top of each other.

This was unexpected enough that the IRS waived the penalty for missed annual RMDs in 2021, 2022, 2023, and 2024 — implicit acknowledgment that the proposed regulation diverged from how the industry had interpreted the law.

In July 2024, the IRS finalized the regulations. The position held: for deaths on or after January 1, 2025, beneficiaries subject to the 10-year rule must take annual RMDs in years 1-9 if the original owner had already started RMDs, plus the year-10 cleanout deadline. The penalty waiver does not extend to 2025 forward.

The practical implications:

  • If the decedent died before age 73 (or whatever their RMD start age was) — annual RMDs are NOT required during years 1-9. Just empty by year 10.
  • If the decedent died after starting RMDs — annual RMDs are required during years 1-9 (using the beneficiary’s Single Life Table factor with annual reduction), AND the account must be empty by year 10.
  • The 2021-2024 waiver years — beneficiaries who missed annual RMDs in those years are off the hook. 2025 forward, the rule is enforced.

This distinction (decedent had-or-hadn’t started RMDs at death) is now the single most important fact to determine when handling an inherited IRA.

Inherited Roth IRAs — different math

Roth IRAs have no RMDs for the original owner, ever. So the question of “had the decedent started RMDs” is moot for inherited Roth IRAs — the answer is always no.

The 10-year rule still applies to non-EDB beneficiaries of Roth IRAs (deaths 2020+), but without annual RMD requirements during years 1-9. The beneficiary can let the inherited Roth grow tax-free for the full 10 years, then withdraw the entire balance in year 10.

That is enormously valuable. An inherited Roth IRA is one of the few financial assets a non-spouse beneficiary can let compound tax-free for a full decade with no forced withdrawal pressure. For a beneficiary in peak earning years, the optimal play with an inherited Roth is almost always: leave it alone, let it grow, withdraw at the end.

This is one of several reasons why Roth conversions during the original owner’s lifetime can be a meaningful gift to heirs — not because the heir’s tax rate is the consideration (the conversion was already paid out at the original owner’s rate), but because the inherited account that goes to the heir is a no-RMD asset rather than a forced-withdrawal asset.

Spousal options — special status

A surviving spouse who inherits an IRA has options non-spouse beneficiaries don’t:

  1. Treat as own. Roll the inherited IRA into the surviving spouse’s own IRA (or treat the inherited IRA as their own). This makes the IRA fully the surviving spouse’s account — RMDs follow the spouse’s own age, not the deceased’s, and the 10-year rule doesn’t apply. The spouse can name new beneficiaries who themselves get a fresh 10-year clock at the spouse’s eventual death.
  2. Inherited IRA in spouse’s name (the “spousal inherited IRA”). The spouse keeps the IRA as inherited. RMDs are based on what the deceased’s RMDs would have been; if the deceased was younger than RMD age at death, the spouse can defer RMDs until the deceased would have been RMD age. This is sometimes useful when the surviving spouse is significantly younger than the deceased.
  3. Disclaim and redirect. The spouse can disclaim the inheritance (within 9 months of death) so the assets pass to the contingent beneficiaries. This is occasionally useful when the surviving spouse already has more retirement assets than they need and the children are in lower brackets.

SECURE 2.0 (2022) added a new spousal option effective 2024: the surviving spouse can elect to be treated as if they were the original participant for purposes of RMD calculations. This produces favorable arithmetic in some narrow scenarios — primarily when the deceased was younger than the spouse but had already started RMDs.

For most spousal beneficiaries, option 1 (treat as own / rollover) is the cleanest default unless there’s a specific reason to defer.

Trust as beneficiary

It’s common for IRAs to name a trust as beneficiary — most often when the original owner wants to control distributions to heirs (minor children, beneficiaries with substance issues, second-marriage scenarios). Trust beneficiary rules are intricate and the trust must qualify as a “see-through trust” under IRS rules to retain any of the favorable inherited-IRA treatment. The four requirements:

  1. The trust is valid under state law
  2. The trust is irrevocable (or becomes irrevocable at death)
  3. The trust beneficiaries are identifiable from the trust document
  4. Trust documentation is provided to the IRA custodian by October 31 of the year after death

If those conditions are met, the trust beneficiaries are typically “looked through” to determine the applicable rule (10-year, EDB, etc.). If they’re not met, the IRA defaults to less favorable rules — typically the 5-year rule (if decedent died before RMD age) or the decedent’s remaining life-expectancy schedule (if decedent died after RMD age).

Within see-through trusts, two structures are common:

  • Conduit trust. RMDs from the inherited IRA must pass through the trust directly to the beneficiary annually. Tax is paid at the beneficiary’s individual rate. Simple.
  • Accumulation trust. The trustee can retain RMDs inside the trust rather than distributing. Income retained in the trust is taxed at trust income tax rates — which compress quickly into the highest bracket (37% ordinary) at modest income levels. Useful when the beneficiary’s receipt of money needs to be controlled (substance issues, creditors, divorce risk), but the tax cost is meaningful.

Trust planning around inherited IRAs is the area where consulting an estate attorney pays the most. The downside cases — non-qualifying see-through, accumulation trust hitting top trust brackets, missed deadlines on documentation — are unforced errors that cost real money. We cover the trust mechanics in more depth in our What is a Trust piece.

Planning angles for the beneficiary

If you’ve inherited an IRA subject to the 10-year rule, several levers exist:

  • Spread withdrawals across the 10 years to manage your own tax bracket. A lump-sum withdrawal in year 10 is the worst possible outcome — it stacks the entire inherited balance on top of one year’s wage income, often pushing into the top federal bracket plus state tax, with possible IRMAA implications. Even withdrawals across the 10 years almost always produce a lower lifetime tax bill.
  • Front-load in low-income years. If you have a year of unemployment, sabbatical, business-loss, or low-earning transition during the 10-year window, that’s the year to take a bigger withdrawal. The inherited IRA fills out a low-income year at low brackets.
  • Coordinate with your own retirement-account contributions. Inherited IRA distributions are ordinary income; they don’t replace earned income for purposes of IRA contributions. If you’re still working, max your own pre-tax 401(k) and IRA contributions during the inherited-IRA-distribution years to offset the income.
  • For inherited Roth IRAs, generally wait. Tax-free growth for 10 years is too valuable to give up.
  • For inherited Traditional IRAs where the decedent was already RMD-aged, take the annual RMDs and manage the rest. The annual RMD is small (typically 3-5% of balance per year using the Single Life Table for a beneficiary in their 50s); the cleanout in year 10 is the bigger event, and front-loading additional voluntary withdrawals in years 1-9 is what manages the bracket exposure.
  • Don’t roll an inherited IRA into your own IRA. Non-spouse beneficiaries cannot do this. The inherited IRA must remain titled as inherited (typically “John Doe (deceased) IRA FBO Jane Doe Beneficiary”). Attempting to commingle is a disqualifying event.

Planning angles for the original owner (so your heirs aren’t blindsided)

If you are still the original owner of an IRA and are thinking about beneficiary planning:

  • Roth conversions during your lifetime are a gift to your heirs. A Roth-converted dollar passed to a non-spouse heir is tax-free during the 10-year stretch period, with no annual RMD pressure. A Traditional dollar passed to the same heir is fully taxable. The tax-arbitrage between your bracket today and your heir’s bracket during their peak earning years is often decisive in favor of converting during your lifetime.
  • Naming the right beneficiaries matters more under the new rules than the old. The old “stretch IRA” was forgiving — naming any individual got at least life expectancy. The 10-year rule punishes the wrong beneficiary structure (no individual named, estate as beneficiary, non-qualifying trust) far more harshly. Confirm beneficiary designations on every IRA, every 401(k), every 403(b), and every annuity once a year.
  • Per-stirpes vs per-capita. Most custodians default to per-capita — if a beneficiary predeceases you, their share goes to the surviving named beneficiaries, not the predeceased’s children. Per-stirpes redirects to the predeceased beneficiary’s lineage. Verify which the custodian has on file; assumptions are routinely wrong.
  • Charitable beneficiary as the bracket-management tool. A Traditional IRA dollar passed to a qualified charity at death generates zero tax (the charity is tax-exempt); the same dollar passed to a non-spouse human heir generates ordinary-income tax over the 10-year window. If you have charitable intent and any taxable assets in a non-IRA account, naming the charity as IRA beneficiary and leaving the taxable assets to the human heir is meaningfully tax-efficient.

How TTCM coordinates inherited IRA planning

For clients with inherited IRAs, or clients planning their own beneficiary designations, several things are part of the standing process:

  • Confirm the decedent-RMD-status fact for any inherited IRA. The annual-RMD-or-not question turns on it; getting it wrong is a 10%+ penalty waiting to happen on year-10.
  • Build a 10-year drawdown schedule for inherited Traditional IRAs that runs against the beneficiary’s projected income over the decade, fitting larger withdrawals to lower-income years and smaller withdrawals to peak-income years. We coordinate with the client’s tax preparer on bracket-fill amounts annually.
  • Default to “leave alone for 10 years” on inherited Roth IRAs unless there’s a specific reason to withdraw earlier (downpayment, debt payoff, etc.). Tax-free compounding for 10 years is rarely beaten.
  • For original-owner clients, run the Roth conversion math with explicit consideration of heir bracket exposure. Conversions don’t have to “pencil” on the original owner’s lifetime alone — the multigenerational view often pushes the math further toward conversion.
  • Audit beneficiary designations annually as part of the financial review. The most common preventable inherited-IRA issue is a stale or incorrect designation — ex-spouse still listed, contingents missing, charity listed but updated charity name not reflected, per-stirpes vs per-capita mismatch. The audit takes 15 minutes and catches things attorneys often miss because they don’t see custodian-level beneficiary forms.
  • Coordinate with estate counsel on trust beneficiaries. When a client wants control over distributions (minor heirs, blended families), we work alongside their attorney on the trust documents to confirm see-through qualification, conduit-vs-accumulation choice, and the deadline-driven custodian filings.

Closing

If you’ve inherited an IRA in the past five years, or you’re naming beneficiaries on your own accounts and want the new rules to actually work for your heirs, the planning is intricate and time-sensitive. Schedule a complimentary 30-minute review with Tim Travis if you want to walk through your specific situation — drawdown timing, bracket management, beneficiary structure, trust qualification. No fee, no obligation, no pressure.

Disclaimer

This is general educational content and is not personalized investment, tax, or legal advice. Inherited-IRA rules are complex, fact-specific, and have changed materially under SECURE Act (2019), SECURE 2.0 (2022), and the IRS Final Regulations issued in July 2024 — consult a qualified tax professional or estate attorney for your specific situation. Past performance does not guarantee future results. T&T Capital Management is an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.