Inherited an IRA in 2024 or later? Here's what changed.
The lifetime stretch is gone for most non-spouse beneficiaries. The replacement is a 10-year drain rule — and recent final regulations confirmed that some beneficiaries also have to take annual RMDs during years 1–9. The tax cost lands in compressed decades; the planning happens in the first year.
For decades, an adult child inheriting a parent's IRA could stretch distributions over their own remaining life expectancy — often 30–40 years — which kept annual tax bills manageable. The SECURE Act (passed in 2019, effective 2020) ended that strategy for most non-spouse beneficiaries. Final IRS regulations issued in July 2024 clarified several ambiguous areas. The new regime is harsher and has more sub-rules than the old one. This guide walks through what applies and to whom.
The default rule for most non-spouse beneficiaries
An inherited IRA must be empty by December 31 of the tenth year following the original owner's death. The full balance has to come out within ten years; the IRS does not care how you sequence the withdrawals — except as noted below.
Whether annual RMDs are required during years 1 through 9 depends on whether the original owner had already started RMDs at the time of death (i.e., reached the SECURE 2.0 start age of 73 or 75). Under the 2024 final regulations: if the original owner was past their required beginning date, the beneficiary must take annual RMDs in years 1–9 AND empty the account by year 10. If the original owner died before their RMD start age, no annual RMDs in years 1–9 are required — but the full balance still must be out by year 10.
The annual-RMD-during-the-10-year-window trap
Many beneficiaries who inherited in 2020–2023 received no IRS enforcement on the annual-RMD-during-the-window question because the IRS waived the penalty for missed RMDs in those years while it finalized the regulations. Starting 2025, the penalty applies normally. If you inherited from a parent who was already taking RMDs and you've taken no withdrawals so far, calendar a planning conversation immediately — you may have a stacked obligation to catch up.
The 25%-of-shortfall penalty (or 10% if corrected timely under SECURE 2.0) applies to missed annual RMDs even if you still empty the account by year 10. It's a separate compliance test.
Eligible Designated Beneficiaries (EDBs) — five carve-outs
The 10-year rule does NOT apply to certain beneficiaries who keep stretch-style treatment. EDBs are: (1) a surviving spouse; (2) a minor child of the decedent (only until majority, then the 10-year rule kicks in); (3) a disabled person (under the SSA definition); (4) a chronically ill person; (5) a beneficiary not more than 10 years younger than the decedent (typically a sibling or significantly-younger spouse-equivalent partner).
Each EDB type has its own technical requirements. The disabled-person and chronically-ill-person carve-outs in particular require documentation that meets specific IRS standards — work with a CPA and ideally an estate attorney to substantiate the claim, ideally established before the account owner dies.
Spouse-specific options — three real paths
A surviving spouse beneficiary has three meaningful choices: (1) Roll the inherited IRA into the surviving spouse's own IRA (spousal rollover). Best for spouses younger than the decedent, especially if they want to delay RMDs until their own age 73. (2) Treat the inherited IRA as their own. Functionally similar to a rollover but without the formal rollover paperwork — accomplished by re-titling the account. (3) Remain a beneficiary. Best for spouses younger than 59½ who need access to the funds without the 10% early-withdrawal penalty — beneficiary IRAs allow penalty-free distributions at any age.
Most surviving spouses default to a rollover within a few months. If liquidity matters in the next 18–24 months and the spouse is under 59½, the beneficiary path may be temporarily better — with a planned conversion to own-IRA status once the spouse reaches 59½.
Roth inherited IRAs — same 10-year rule, different math
Inherited Roth IRAs face the same 10-year drain rule as inherited traditional IRAs, with one crucial difference: there are no annual RMDs required during years 1–9 (Roths have no lifetime RMDs for the original owner, so the 'was the decedent past their required beginning date' question doesn't trigger). The full balance must still come out by year 10.
But the distributions from an inherited Roth IRA are tax-free (assuming the original 5-year holding period has been met). So the strategy is usually opposite: with traditional inherited IRAs, you want to spread distributions across the 10 years to manage bracket impact. With inherited Roth IRAs, you want to delay distributions as long as possible to maximize tax-free growth — pull the lump sum near the end of year 10. The math of inherited Roths is one of the few unambiguous wins in this whole rule set.
Planning moves to compress the tax cost
Time the lump-year. For a traditional inherited IRA, look at your projected taxable income across the 10-year window. Take more in low-income years (sabbaticals, job changes, before Social Security claims) and less in high-income years. The total tax bill on the same dollars can vary by 20–40% based on timing alone.
Coordinate with Roth conversions on your own accounts. If you're inheriting a large traditional IRA, the conversion math on your own pre-tax balance changes — you'll want to delay your own conversions during the years you're pulling from the inherited IRA.
Don't combine inherited IRAs with your own. Inherited IRAs are a separate tax universe; rolling them into your own account is generally not allowed for non-spouse beneficiaries (and is a one-shot mistake when it happens).
Consider charitable QCDs if you're 70½ and inheriting. The inherited IRA itself can be the source of a QCD, which can be a quiet way to satisfy both the giving impulse and the 10-year drain without driving up taxable income.
Multiple-beneficiary situations
If an IRA names multiple beneficiaries, each beneficiary's separate share should be split into individual inherited IRAs by December 31 of the year following death. If that's not done, the youngest beneficiary's RMD calculation can drag the others into unfavorable timing. Custodians handle the split mechanically; the IRS deadline is real.
Disclaimers (refusing the inheritance so it passes to the contingent beneficiary) are still available under SECURE 2.0 and remain a useful tool in specific situations — especially when an older sibling has the means to absorb a lump sum and a younger sibling has higher need.
What to do in the first 60 days after inheriting
Get the death certificate (multiple copies — you'll need them).
Notify the custodian and request inherited-IRA paperwork.
Establish the inherited IRA in your name — do not take possession of the funds personally (this triggers immediate taxation of the entire balance).
Confirm whether the original owner was past their RMD start age and whether their most recent RMD was satisfied for the year of death. If not, the year-of-death RMD must be satisfied by you, the beneficiary, by December 31 of that calendar year.
Sit down with the multi-year tax projection before you take any distributions beyond the year-of-death RMD. The 10-year clock is unforgiving but the timing within it is flexible — make the early decisions deliberately.