Inherited IRA rules: what you must take out each year, and by year 10

Your dad left you part of his individual retirement account (IRA), and the letter from his brokerage says you have 10 years to empty it. A sibling heard you can roll it into your own account. A coworker swears there's a penalty for cashing out early. Before you move a dollar, it helps to know which inherited IRA rules apply to you. They turn on two facts: who you are to the person who died, and how old they were. The Internal Revenue Service (IRS) sets the clock from there.

The short answer: Under IRS rules, most adult children who inherit an IRA must empty it by December 31 of the 10th year after the owner's death. If the owner had already reached their required beginning date (generally age 73), you also take a yearly minimum in between, which the IRS enforces from 2025. Spouses, minor children and a few others can take longer.

Key takeaways

• Four groups set the rules: a surviving spouse, an eligible designated beneficiary, every other person named on the form, and an estate, trust or charity.
• Most adult children follow the 10-year rule, and if the parent had reached their required beginning date, a yearly minimum is due too.
• Withdrawals from an inherited traditional IRA are taxed as ordinary income, but the 10% early-withdrawal penalty doesn't apply to beneficiaries.
• In our example, cashing out a $300,000 inherited IRA in one year costs about $20,000 more in federal tax than ten even withdrawals.
• Deaths before 2020, estates named as beneficiary, siblings sharing one account and Pennsylvania's 4.5% inheritance tax each change the plan.
• The costliest mistakes: depositing the money in your own IRA, skipping yearly minimums, and cashing out in your highest-earning year.

Which inherited IRA rules apply to you?

Your rules depend on who you are to the owner and whether the owner died before or after their required beginning date. The required beginning date is when the owner had to start required minimum distributions (RMDs), the yearly withdrawals the IRS requires from traditional IRAs. Per the IRS RMD FAQs, owners generally start at age 73 and can delay the first one "until April 1 of the following year."

An inherited IRA is a separate account kept in the name of the person who died, for your benefit. You don't merge it with your own savings.

The four groups

The IRS sorts beneficiaries like this on its Retirement topics: Beneficiary page, updated August 1, 2026:

• A surviving spouse. The most choices of anyone, covered below.
• An eligible designated beneficiary. The IRS list is the "spouse or minor child of the deceased account holder," a disabled or chronically ill person, or someone "not more than 10 years younger" than the owner. That last group can include a brother or sister close in age. These beneficiaries can usually spread withdrawals over their own life expectancy.
• Any other person named on the beneficiary form. Adult children, grandchildren, nieces, nephews and friends. They follow the 10-year rule.
• An estate, trust or charity. These aren't people, so different clocks apply. See the exceptions section.

If you inherited your spouse's IRA

A surviving spouse who is the only beneficiary has three main options. The IRS settles who the beneficiaries are by September 30 of the year after the death.

1. Treat it as your own, or roll it into your own IRA. It becomes your account, and RMDs follow your age. The catch: IRS Publication 590-B warns that a withdrawal before you reach 59½ "may be subject to the 10% additional tax."
2. Keep it as an inherited IRA. You take withdrawals over your own life expectancy. If your spouse died before their required beginning date, you can wait until the year they would have turned 73 to start.
3. Use the 10-year rule, if your spouse died before their required beginning date.

Because withdrawals from an inherited IRA avoid that 10% tax, some younger widows and widowers keep the account as an inherited IRA, at least until 59½. Our guide to what to do financially after the death of a spouse covers the rest of the first year.

How the 10-year rule works

The 10-year rule means the whole account has to be withdrawn by the end of the 10th year after the owner died. In the words of IRS Publication 590-B, beneficiaries must "withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner's death."

Here's how to work out your own schedule:

1. Find the year of death and add 10. A death in 2025 means the account must be empty by December 31, 2035. A death in 2020 means December 31, 2030.
2. Check whether the owner had reached their required beginning date. If not, the IRS says "no distribution is required for any year before the 10th year." You choose the timing.
3. If the owner had, take a yearly minimum starting the year after death. IRS Notice 2024-35 says the beneficiary "must take an annual RMD beginning in the first calendar year after the calendar year of the employee's death."
4. Figure the minimum. Divide the account's December 31 balance by a life-expectancy factor from Table I in Publication 590-B. Use the longer of your factor or the owner's, then subtract one each year after that.
5. Take each minimum during its calendar year, and keep a note of what you took.

Why so many people heard "nothing is due until year 10"

For 2021 through 2024, the IRS waived the penalty for skipped yearly minimums under the 10-year rule. It did so in Notices 2022-53, 2023-54 and 2024-35. The final regulations apply to RMDs "for calendar years beginning on or after January 1, 2025." So the yearly minimum is now enforced, but the original deadline didn't move.

Miss a required minimum and the shortfall can face an excise tax, which the FAQ below covers.

How inherited IRA withdrawals are taxed

Money you take out of an inherited traditional IRA counts as ordinary income in the year you take it, taxed like your paycheck. The IRS puts it plainly: "Beneficiaries must include any taxable distributions they receive in their gross income."

• No 10% early-withdrawal penalty. The IRS lists distributions made "after death of the participant/IRA owner" as an exception to the tax on early distributions. That holds whatever your age.
• Some of it may already be taxed. If your parent made nondeductible contributions, Publication 590-B says "that basis remains with the IRA," so part of each withdrawal is tax-free. You track it on a separate Form 8606.
• Inherited Roth IRAs are usually tax-free. The IRS says "withdrawals of contributions from an inherited Roth are tax free" and most earnings are too, unless the Roth was less than five years old.
• A Roth still has a deadline. IRS rules treat a Roth owner as if they died before their required beginning date. So a beneficiary on the 10-year rule has no yearly minimum, but the account still has to be empty by the deadline.

State income tax may apply on top. If you're weighing Roth against traditional for your own savings, our guide to Roth vs. traditional IRAs explains why the tax timing matters.

Worked example: a $300,000 IRA from a parent

Take Erin, 40, a single nurse in Pittsburgh who earns $70,000. She's an illustration, not a client. Her dad died in 2025 at 77, already taking RMDs, and left her his $300,000 traditional IRA.

• Her deadline: December 31, 2035.
• Her 2026 minimum: $300,000 divided by 45.7, the IRS Table I factor for age 40 (her age in 2026), is about $6,565.
• Her taxable income before the IRA: $70,000 minus the 2026 standard deduction of $16,100 leaves $53,900. For single filers in 2026, the 22% bracket covers income over $50,400 up to $105,700, according to the IRS 2026 inflation adjustments.
• Option A, cash it all out in 2026: taxable income jumps to $353,900, reaching the 35% bracket. Extra federal tax: about $86,000.
• Option B, take $30,000 a year for 10 years: taxable income of $83,900 each year, still inside the 22% bracket. Extra federal tax: $6,600 a year, about $66,000 in total.

On these numbers, spreading the withdrawals saves Erin about $20,000 in federal tax, and each $30,000 withdrawal more than covers her yearly minimum. This is KAV's math, using 2026 federal brackets for every year; it ignores investment growth, future bracket changes and state tax.

The minimum alone isn't a plan. At about $6,565 a year, most of the account would still be there in 2035. Then one large withdrawal could push her into the same high brackets as Option A.

Exceptions: older deaths, estates, siblings and Pennsylvania

The 10-year rule covers most heirs today, but five situations change the math.

If the owner died before 2020

Older rules apply. The IRS says a non-spouse beneficiary could generally "take distributions based on their own life expectancy, beginning the end of the year following the year of death," or follow a 5-year rule. If a bank tells you to cash out an older inherited account, ask which rule it's applying and why.

If a minor child inherits

A child of the owner counts as an eligible designated beneficiary only until the age of majority. The IRS final regulations say "an individual reaches the age of majority on the individual's 21st birthday." After that, the 10-year rule applies to what's left. A minor also needs an adult to manage the account, a question we cover in whether a minor can be a life insurance beneficiary.

If the estate or a trust is the beneficiary

Sometimes the beneficiary isn't a person at all, such as the owner's estate. If the owner died before their required beginning date, the 5-year rule applies. The account must be empty "by the end of the 5th year following the year of the account holders' death." If they died after it, withdrawals follow the owner's remaining life expectancy. Probate doesn't pause either clock. Trusts have their own technical rules, which belong with an estate-planning attorney. Naming a contingent beneficiary helps keep an account out of this branch.

If siblings share one IRA

A single IRA can be split into separate inherited IRAs, one per beneficiary. Publication 590-B says the shares won't be combined for RMD purposes if they're "established by the end of the year following the year of the IRA owner's death." Once split, each sibling sets their own timing.

If the person who died lived in Pennsylvania

Pennsylvania, KAV's home state, has an inheritance tax. The Pennsylvania Department of Revenue lists "4.5 percent on transfers to direct descendants and lineal heirs," 12% for siblings, 15% for other heirs except charities, and 0% for a surviving spouse. It's due at death, becomes delinquent nine months after it, and earns a 5% discount if paid within three months.

Whether an inherited IRA is taxed depends on the account and the owner's situation, so ask the estate's attorney or the county Register of Wills. Other states have different rules.

Common inherited IRA mistakes

Most costly inherited IRA mistakes happen in the first few months, often on advice from someone who meant well.

• Depositing it in your own IRA. Only a spouse can do that. For everyone else, Publication 590-B is blunt: you "can't roll over any amounts into or out of the inherited IRA." Move it only by a trustee-to-trustee transfer. The new account has to be kept "in the name of the deceased IRA owner for the benefit of you as beneficiary." A check made out to you is a withdrawal, and you can't put it back.
• Assuming nothing is due until year 10. That's true only if the owner died before their required beginning date, or the account is a Roth. Check the owner's age first.
• Waiting, then emptying it in year 10. One large withdrawal can land in a bracket you'd never reach with even withdrawals, as Erin's example shows.
• Cashing out in your highest-earning year. A year with a bonus, a big raise or two full incomes is the most expensive year to take a big withdrawal.
• Spending the money before setting aside the tax. Ask the custodian to withhold, or set aside part of each withdrawal for April.
• Buying something with it before you know your numbers. If someone recommends a product for the money before asking about your deadline, income and debts, that's a sales pitch.

What to do in the next 30 days

You don't need every answer this week. You need the deadline and the first year right.

1. Call the IRA custodian with a copy of the death certificate and ask for the beneficiary claim packet.
2. Ask three questions: Had the owner reached their required beginning date? Was this year's RMD taken? Who else is named on the form?
3. Open an inherited IRA in the owner's name for your benefit, by direct transfer. If siblings share, ask for separate accounts before the end of the year after the death.
4. Write down your deadline (the year of death plus 10) and, if yearly minimums apply, the first year's amount.
5. Sketch a withdrawal plan across the years, and check it with a tax professional before the first withdrawal.
6. Decide what the money is for. Paying off high-interest debt with our credit card payoff guide, building an emergency fund, or your own retirement.
7. Ask how to name a beneficiary for the inherited IRA itself, so the account has a plan if something happens to you.

If you would like help turning this into a plan, KAV Solutions offers a complimentary Financial Needs Analysis. A licensed insurance professional walks through how this inheritance fits your family's protection and goals with you. The analysis is free and you never pay KAV a fee. If you choose to buy a policy, the insurer pays the professional a commission.

For tax decisions, bring the numbers to a tax professional. Not ready to talk? Start with KAV's free retirement checklist.

Frequently asked questions

KAV Solutions is a women-led team of licensed insurance professionals based in Pennsylvania. This article is general education, not individualized financial, tax, or legal advice. Retirement account rules depend on each account's terms, and inheritance and income tax rules vary by state.