Learn about the rules for inherited IRAs (2024)

Rules for Spouses

Inherited IRA rules for spouses did not change with the passage of the SECURE Act.

• Spouses can take a lump sum distribution of the entire account.
  • You will have to pay taxes on the distribution, but the early-withdrawal penalty is waived.
• You can treat the IRA as your own and:
  • Transfer the cash/assets into your existing IRA or a new IRA in your name.
  • Leave funds in the plan for as long as IRS rules allow.
  • Withdraw funds anytime, but if you are not 59 ½ years or older, you’ll pay a 10 percent early-withdrawal penalty.
  • If the original IRA owner was taking RMDs but had not taken one the year they died, you must take the RMD for that year. This distribution is penalty free.
• As a spouse, you can open an inherited IRA in your own name, and you must:
  • Start taking distributions that are based on your life expectancy no later than December 31 of the year following the original plan owner’s death.
  • Take an RMD in the year of the original plan owner’s death if one was not already taken (if the plan owner was of retirement age and eligible for RMDs).
• If you inherit a Roth IRA, please note:
  • For Roth IRAs, you must wait until the original account is five years old to take tax-free distributions. However, you can withdraw contributions at any time.

Rules for Eligible Beneficiaries

The rules for eligible beneficiaries are the same regardless of when the IRA was inherited except when minor children are the beneficiaries.

• Open inherited IRA plan and transfer funds from the deceased’s account.
• You cannot make contributions to this plan.
• You must take annual RMDs, which are stretched over your life expectancy. You will not incur an early-withdrawal penalty for lifetime stretch distributions.

See the following considerations for Roth IRAs:

• You can take tax-free distributions of initial contributions to the account at any time.
• If the account has been established for 5 or more years,distributions of Roth IRA earningsare tax-free.
• If distributions of earnings are taken within the first 5 years after the original account was opened, these distributions will be subject to income tax.

Eligible Beneficiary Definitions

• Minor children who inherited the IRA in 2020 and later must take RMDs from the inherited plan until they turn 18 or 21 (depending on state laws), at which time their 10-year clock starts to deplete all inherited funds from the account. If they inherited the account prior to 2020, they can stretch their IRA distributions throughout their lifetime.
• Besides spouses and minor children, eligible beneficiaries are:
  • Beneficiaries who are disabled and/or chronically ill at the time of the plan owner’s death, as defined by IRC 72(m)(7), can take advantage of the lifetime stretch rule.
  • Beneficiaries who are not more than 10 years younger than the deceased (such as a sibling or a life partner) can stretch distributions over their lifetimes.

Rules for Non-Spouse Beneficiaries

Non-spousal beneficiaries include children, grandchildren, etc., who are not considered eligible beneficiaries as defined by the IRS.

Please see the eligible beneficiary section if you are not a spouse but are a beneficiary who is disabled, chronically ill, or a minor child. The information below is for all other non-spouse beneficiaries.