Understanding IRS Rules for Inherited IRA Distribution

By Nur

May 01, 2025

In Retirement Planning

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Inheriting an IRA can feel like a financial windfall, but navigating the IRS rules for inherited IRA distribution can quickly become complex. This guide breaks down those rules in plain language, helping you understand your responsibilities and options as a beneficiary.

What is an Inherited IRA?

An inherited IRA is an IRA you receive from someone who has passed away. It's crucial to understand that an inherited IRA is not your own retirement account. It’s a separate account governed by specific IRS regulations regarding distributions and taxation. The rules differ based on your relationship to the deceased (the original IRA owner) and when the original owner passed away.

Who Qualifies as a Beneficiary?

The IRS defines a beneficiary as anyone designated to receive assets from an IRA after the owner's death. Beneficiaries can include:

• Spouse: Surviving spouses often have the most flexibility in how they handle an inherited IRA.
• Children: Adult or minor children can be beneficiaries.
• Other Family Members: Siblings, parents, or other relatives can be named as beneficiaries.
• Friends: Non-family members can also be designated beneficiaries.
• Trusts: A trust can be named as the beneficiary of an IRA, which can add complexity to the distribution rules.
• Charities: Charities can also be named beneficiaries.

Key IRS Rules for Inherited IRA Distribution

The IRS rules for inherited IRA distribution hinge on two primary factors: whether the original IRA owner died before or after their required beginning date (RBD) for taking required minimum distributions (RMDs), and the beneficiary's relationship to the deceased. The RBD is generally April 1st of the year following the year the IRA owner turned 73 (it was 72 prior to 2023).

The 10-Year Rule: A Major Change

A significant change in the IRS rules, particularly impacting those inheriting after January 1, 2020, is the introduction of the 10-year rule. This rule generally requires that the entire inherited IRA balance be distributed within 10 years of the original owner's death. It's important to note that this rule primarily applies to beneficiaries who are not considered