Spokane Financial Advisor: Inherited IRA Rules After the SECURE Act
If you have already inherited an IRA, there is a good chance you are dealing with two things at once: paperwork and emotion.
For many people, an inherited IRA shows up during a difficult season of life. You may be trying to settle an estate, support family members, and make good decisions without feeling fully confident about the rules. That is exactly why this topic feels heavier than a normal financial planning question.
The good news is that the rules can be made more understandable.
The hard part is that the SECURE Act changed the old inherited IRA framework in a major way. Before 2020, many non-spouse beneficiaries could stretch distributions over their life expectancy. For deaths after 2019, that long-term “stretch” option largely went away for most non-spouse beneficiaries, and many now fall under the 10-year rule instead.
Here is the simple version:
- Many adult children who inherit an IRA now have to empty the account within 10 years.
- Some beneficiaries still qualify for special treatment.
- Taxes can become a bigger issue than people expect.
- The timing of withdrawals can matter just as much as the fact that withdrawals are required.
This is where thoughtful planning matters. A good Spokane Financial Advisor is not just helping you decode IRS rules. They are helping you make a decision that fits your tax picture, your income, your other investments, and your long-term goals through a broader financial planning process. They are helping you make a decision that fits your tax picture, your income, your other investments, and your long-term goals.
What Changed After the SECURE Act?
The SECURE Act changed the inherited IRA rules for many beneficiaries when the original account owner died after 2019. The IRS explains that the post-death distribution rules now depend on factors such as whether death occurred after 2019, the beneficiary’s relationship to the original owner, and whether the original owner died before or after their required beginning date.
For most non-spouse heirs, the biggest change was this:
Instead of stretching required withdrawals over life expectancy, many inherited IRA beneficiaries now must fully distribute the account by the end of the 10th year after the original owner’s death. The IRS states this directly in Publication 590-B: for designated beneficiaries who are not eligible designated beneficiaries, distributions must be completed within 10 years of the owner’s death.
That is the rule many heirs are now running into.
The Inherited IRA 10-Year Rule, in Plain English
The inherited IRA 10-year rule means the account generally must be fully emptied by December 31 of the year containing the 10th anniversary of the original owner’s death. The IRS gives a simple example: if the owner died in 2025, the beneficiary generally must fully distribute the IRA by December 31, 2035.
That sounds straightforward, but there is an important complication.
If the original owner died before their required beginning date (for required minimum distributions), and the 10-year rule applies, the IRS says no distribution is required in years 1 through 9. The account simply must be fully distributed by the end of year 10.
But the rules became more complicated when the original owner died on or after their required beginning date. Final regulations now apply for calendar years beginning on or after January 1, 2025, and the IRS had previously issued transition relief for certain missed distributions in earlier years while the rules were being finalized.
In practical terms, this means some beneficiaries may face both:
- annual required minimum distributions during the 10-year window, and
- a requirement to fully empty the account by the end of year 10.
This is one reason inherited IRA decisions should not be handled casually.
Who Gets Special Treatment and Who Usually Does Not?
Not every beneficiary is treated the same.
Most adult children and non-spouse heirs
If you are an adult child who inherited a parent’s IRA, you will often fall into the group that must follow the 10-year rule. Publication 590-B says that a designated beneficiary who is not an eligible designated beneficiary must fully distribute the IRA within 10 years of the owner’s death.
For many people, that is the category that applies most often.
Spouses
Spouses have more options. The IRS notes that a surviving spouse may be able to keep the account as an inherited IRA, take distributions based on the deceased spouse's life expectancy, or roll the account into their own IRA depending on the facts.
That is very different from the rules that usually apply to adult children.
Eligible designated beneficiaries
The IRS defines an eligible designated beneficiary as the owner’s surviving spouse, the owner’s minor child, a disabled individual, a chronically ill individual, or an individual who is not more than 10 years younger than the IRA owner. These beneficiaries may still use life expectancy-based payouts on their own life in certain cases instead of being forced immediately into the standard 10-year rule.
That is why two siblings can inherit different accounts and still face different planning choices if the facts are not exactly the same. It is also one reason beneficiary designations matter more than many families realize.
Do You Need Annual Distributions?
This is one of the biggest points of confusion around SECURE Act inherited IRA rules.
Many people heard “10-year rule” and assumed they could simply wait until year 10. In some cases, that is true. In others, it is not.
The IRS says that if the original owner died before the required beginning date (taking required minimum distributions) and the 10-year rule applies, no distribution is required before the 10th year.
However, the IRS also finalized regulations that apply beginning in 2025, and those rules matter for beneficiaries when the original owner died after their required beginning date. The earlier transition notices for 2021 through 2024 are one reason many heirs and even some advisors were confused.
This is one of those places where broad internet summaries can be misleading. The right answer depends on:
- who inherited the account,
- when the original owner died,
- whether the original owner had already started RMDs,
- whether the account is traditional or Roth,
- and what the custodian (the company that is holding the account) is requiring .
What about inherited Roth IRAs?
- Inherited Roth IRA for most non-spouse heirs: usually no annual RMDs, but yes, a full payout deadline by year 10.
- Inherited Roth IRA for some eligible beneficiaries: life-expectancy RMDs may apply instead.
Why Taxes Matter More Than Most Heirs Expect
An inherited IRA is not just an administrative issue. It is a tax planning issue.
The IRS explains that beneficiaries generally may take a lump-sum distribution at any time, but taxable distributions must be included in gross income.
That means a large inherited traditional IRA can create real tax pressure.
If you inherit a sizable IRA and wait too long, you may end up forcing large withdrawals into the later years of the 10-year window. That can increase taxable income in a concentrated period. Depending on your situation, it may affect:
- your marginal tax bracket,
- Medicare premium surcharges,
- taxation of Social Security,
- capital gain planning,
- charitable giving strategy,
- and broader estate planning decisions.
This is where financial planning becomes more valuable than a one-line rule summary. The right withdrawal pattern may not be “take as little as possible.” Sometimes it makes sense to spread distributions more evenly. Sometimes it makes sense to coordinate inherited IRA withdrawals with lower-income years, retirement timing, or business income fluctuations.
That is also where related strategies like Roth conversions can enter the conversation. Not because you can convert the inherited IRA into your own Roth as a non-spouse beneficiary, you generally cannot, but because inherited IRA distributions can affect your broader tax picture and influence how you approach your own retirement accounts.
Common Mistakes Heirs Make
A lot of inherited IRA problems are not caused by bad intentions. They are caused by delay, confusion, or oversimplified advice. Here are some common mistakes:
1. Assuming all beneficiaries get the same rules
They do not. Spouses, eligible designated beneficiaries, adult children, estates, and certain trusts can all be treated differently, which is one reason it helps to understand when a trust may or may not make sense in the first place.
2. Assuming “10 years” means no action until year 10
That may be true in some cases, but not in all. The original owner’s required beginning date matters.
3. Waiting too long to look at the tax impact
Even when the rules allow flexibility, tax planning still matters. A beneficiary who delays everything until the end could create a much larger tax bill than necessary.
4. Failing to confirm how the account is titled
Inherited IRAs need to be set up properly. Administrative mistakes can create unnecessary problems.
5. Treating this as a one-account issue instead of a planning issue
An inherited IRA does not sit in isolation. It affects retirement planning, investment management decisions, cash flow, and in some cases future estate planning.
6. Missing a required distribution
The IRS notes that missed RMDs can trigger an excise tax of 25% on the amount not distributed as required, reduced to 10% if corrected within the applicable window.
Practical Example #1
Suppose Lisa, age 62, inherits a $450,000 traditional IRA from her mother in 2026.
Lisa is not a spouse. She is an adult child beneficiary. That means she will often fall under the 10-year rule. If her mother died before her required beginning date, Lisa may have flexibility to spread distributions across the 10-year period or wait and take more later, as long as the account is emptied by the deadline.
But the planning question is not just, “What is the deadline?”
The better question is, “How do these withdrawals fit into Lisa’s tax planning?”
If Lisa is still working and earning a high income, taking large inherited IRA distributions during her peak earning years may not be ideal. On the other hand, if she expects to retire in a few years, it may make sense to plan larger withdrawals in lower-income years.
The rule tells her the boundaries. Planning helps her choose the path.
Practical Example #2
Now suppose Mark inherits a traditional IRA from his father, who had already begun taking required minimum distributions.
Mark hears from a friend that the new rule is simple: “Just empty it by year 10.”
That kind of casual advice can be risky.
Because the original owner had already reached the required beginning date, Mark may need to consider annual distribution requirements during the 10-year period in addition to the final deadline. The IRS’s recent final regulations and prior transition notices are exactly why this distinction matters.
This is the kind of situation where working with a tax professional and a Spokane Financial Advisor can help prevent an avoidable mistake.
How Inherited IRA Decisions Connect to Broader Financial Planning
An inherited IRA often becomes the starting point for a much bigger conversation. That conversation can include:
- how much cash you really need from the account,
- whether inherited IRA withdrawals should be coordinated with your other income,
- how the inherited account should be invested,
- whether you should adjust withdrawals from your own accounts,
- whether charitable giving should be part of the plan.
- and how this inheritance changes your long-term goals.
This is why the best planning is not just about understanding IRA beneficiary rules. It is about connecting those rules to your real life, including bigger decisions around Washington estate tax planning and how assets pass to the next generation.
A thoughtful investment advisor can help you look at the inherited account alongside your full financial picture, including how it fits with your broader investment management strategy. For example, if you're giving to any 501c3 organziations, by helping implement tax strategies like making tax-free Qualified Charitable Distribtuions from an inherited IRA if you're age 70.5 or older. A strong advisory team can also coordinate with your CPA or estate attorney so tax planning, retirement planning, and estate planning are working together instead of in separate silos.
When It Makes Sense to Speak With a Spokane Financial Advisor
You may want professional help if:
- you inherited a large traditional IRA and are unsure how to spread withdrawals,
- the original owner died after beginning RMDs,
- you are balancing this inheritance with your own retirement timeline,
- you want to avoid creating a larger tax bill than necessary,
- you have multiple inherited accounts,
- or you want the inherited IRA decision to fit into a larger financial planning strategy.
This is where a Spokane Financial Advisor can add value beyond just explaining rules. Good advice is not only about compliance. It is about helping you make a thoughtful decision during a meaningful life transition.
A fee-only, team-based firm can be especially helpful here because the conversation is not limited to one product or one account. It can include investment management, tax planning, retirement planning, Roth conversion strategy for your own accounts, and estate planning coordination.
Next Step
If you have inherited an IRA and want help understanding your next steps, a conversation can bring a lot of clarity. Our team can help you think through the rules, the tax planning implications, and how this account fits into your broader financial planning. When you are ready, schedule a consultation with our team to talk through your situation and build a thoughtful plan.
Talk with our Spokane Financial Advisor team
FAQ
Do I have to take money out of an inherited IRA every year?
Not always. If the original owner died before the required beginning date and the 10-year rule applies, the IRS says no annual distribution is required before year 10. But if the original owner died on or after the required beginning date, the answer can be different.
What is the 10-year rule for an inherited IRA?
It generally means the inherited account must be fully distributed by December 31 of the year containing the 10th anniversary of the original owner’s death.
Do spouses follow the same inherited IRA rules as adult children?
No. The IRS gives surviving spouses more options, including in some cases the ability to roll the account into their own IRA.
Who counts as an eligible designated beneficiary?
The IRS says this includes a surviving spouse, the owner’s minor child, a disabled individual, a chronically ill individual, or someone not more than 10 years younger than the IRA owner.
What happens if I miss a required inherited IRA distribution?
You may face an excise tax. The IRS says the tax can be 25% of the amount not distributed as required, reduced to 10% if corrected within the applicable correction window.
Are inherited IRA withdrawals taxable?
In many cases, yes. The IRS says beneficiaries generally must include taxable distributions they receive in gross income.
Should I take the money all at once or spread it out?
That depends on your tax picture, income, time horizon, and the specific inherited IRA rules that apply to you. For many people, this is a planning decision, not just a deadline decision.
Related Reading
About the Author
Noah Schwab, CFP® is a financial advisor in Spokane, Washington, helping retirees with $ 1M+ maximize their 401(k) with Roth conversions and tax strategies.
- No commissions or insurance
- Investment management, tax, and financial planning
Noah Schwab, CFP®, is a Spokane financial advisor specializing in helping retirees with tax-efficient retirement income strategies, Roth conversions, and estate planning. This article is for educational purposes only and should not be considered tax or legal advice.
