Inherited IRAs: Reminder about Required Minimum Distributions

Reading Time: 4 minutes


Close up of stacking gold coins and wooden blocks written IRA on nature background and natural lighting. Individual Retirement Account conceptUnder the SECURE Act, the way Inherited IRAs and Roth IRAs’ Required Minimum Distributions (RMDs) were handled was altered. And while the CARES Act temporarily removed the RMD in 2020, this year, distributions are again required. It is important to understand your options, especially as there is a 50% tax penalty for failing to take the RMD.

The SECURE Act went into effect on January 1, 2020 and, therefore, retirement accounts with inheritance occurring before December 31, 2019 will not follow the new process. For individuals that inherited a retirement account after the January date, the new rules apply.

What RMD Rules Apply?

The relationship to the owner of the retirement account dictates the options the beneficiary has as to how the inheritance is handled and what RMD rules apply.


If the owner and the beneficiary were married, the surviving spouse has two main options available. The first option is that the surviving spouse can declare the IRA/Roth IRA as their own and move it to a new or existing retirement account in their own name. The RMDs would then be apply to the account based on the beneficiary’s age (RMDs are required to start in the year an individual reaches age 72). The second option for the surviving spouse is to move the account to an Inherited IRA. When this choice is selected, the RMD is taken each year and based on the recipient’s own life expectancy (see here for an IRS chart on the subject). The surviving spouse’s age and income needs should play a role in determining which option to use. It is interesting to note that neither of these choices were altered by the passage of the SECURE Act.


If the owner and the beneficiary were not spouses, the largest change has occurred. For inherited accounts before the SECURE Act, a beneficiary could move the assets to an inherited IRA and stretch out the required distributions over their own lifetime – this is referred to as a stretch IRA. The SECURE Act changed this option. If the original owner is deceased on or after January 1, 2020, the non-spousal beneficiary still moves the assets to their Inherited IRA or Roth IRA. However, the new rules state that the inherited account needs to be completely distributed in 10 years following the death of the owner. The annual distribution requirement is no longer there. A beneficiary could receive distributions each year over the 10-year window, but it is not required. The only requirement is that the inherited account be fully depleted in that timeframe.

Please note that any time a distribution is processed, it is considered taxable income for that calendar year. Inherited Roth IRA distributions are tax-free as long as the funds were in the originating account for five years. (The earnings would be taxable if held for less than five years).

There are exceptions that can eliminate the 10-year requirement for non-spousal beneficiaries. With the exception, a beneficiary would move the assets to an inherited IRA/Roth IRA and take the RMDs based on their own life expectancy. Those that qualify for an exception are the following: person who is not more than 10 years younger than the original account owner, the minor child of the original account holder or a beneficiary that is chronically ill or disabled. In these instances, the RMD can proceed under the beneficiary’s life expectancy.


Some retirement account holders choose to name an entity (like an estate, trust or charity) as the beneficiary of their IRA. The determining factor of how the distributions are required is based on the age of the original, deceased account holder. If the holder was 72 years old at the time of passing, the distribution can be taken over the life expectancy of the original IRA owner. If the IRA holder was under age 72, the inherited account would need to be distributed in full by the fifth year after the owner passed.

Prepare to Implement the New Rules Today

Remember, beneficiaries always have the option to take distributions larger than the required amount or on a faster time schedule. Recipients can also take a lump sum distribution at the time of inheritance. Due to the many options available, it is important to review your situation with a tax and financial advisor. Please contact our team for assistance.

Contact us below:

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


Join 14,000+ business executives and decision makers

Upcoming Events

Latest Insights

About The Author