Inherited IRA RMD Rules: What Beneficiaries Must Know in 2026

A client dies on a Tuesday. By Wednesday morning, their adult children want to know what happens to the inherited IRA — and whether they can just leave it alone for a decade.

The answer used to be straightforward. Before the SECURE Act of 2019, most non-spouse beneficiaries could stretch distributions over their own life expectancy, deferring taxes for decades. That option is gone for the vast majority of inherited IRAs where the original account holder died after December 31, 2019.

The 10-Year Depletion Rule

Most non-spouse beneficiaries who inherit an IRA from someone who died after 2019 must fully deplete the account by December 31 of the tenth year following the year of death. No extensions. No exceptions for account size.

But the 10-year clock comes with a critical wrinkle that caught the entire advisory industry off guard: if the original account holder had already begun taking required minimum distributions (meaning they had reached their required beginning date), the beneficiary must also take annual RMDs during each of those ten years. The account must still be emptied by year ten, but you cannot simply skip distributions in years one through nine and take a lump sum at the end.

The IRS finalized this requirement in July 2024 after three years of proposed regulations and repeated penalty waivers. Starting in 2025, annual RMDs during the 10-year window are mandatory — and the penalties for missing them are real.

Annual RMD Calculation for Inherited IRAs

When annual distributions are required after the owner died on or after the required beginning date, a designated beneficiary generally uses the longer of the beneficiary's single life expectancy and the owner's life expectancy. If the beneficiary's factor controls, use the beneficiary's age in the year after death and subtract one from that original factor each subsequent year. Divide the prior December 31 account balance by the applicable factor.

For example, if the beneficiary's factor controls and the beneficiary is 45 in the year after the original owner's death, the initial factor in the IRS table is 41.0. Year one RMD equals the account balance divided by 41.0. Year two uses 40.0. Year three uses 39.0. And so on — but the entire balance must still be distributed by year ten regardless of where the life expectancy calculation stands.

This creates an unusual planning dynamic. The annual RMDs may be relatively small compared to the total balance, which means a substantial lump sum could still be required in year ten unless the beneficiary voluntarily accelerates distributions in earlier years.

Eligible Designated Beneficiaries: The Exception

Five categories of beneficiaries still qualify for the old stretch rules under the life expectancy method:

• Surviving spouses (who also have the unique option to roll the IRA into their own)
• Minor children of the account holder (not grandchildren — for these federal distribution rules, the child reaches majority at age 21, when the 10-year clock begins)
• Disabled individuals meeting the strict IRS definition under IRC Section 72(m)(7)
• Chronically ill individuals as certified by a licensed healthcare provider
• Beneficiaries not more than 10 years younger than the deceased account holder

These eligible designated beneficiaries (EDBs) can still take annual distributions based on life expectancy. When the owner died on or after the required beginning date, the beneficiary generally uses the longer of the beneficiary's and owner's life expectancies.

Penalties for Missed RMDs

Prior to SECURE Act 2.0, the penalty for missing a required minimum distribution was 50% of the amount that should have been withdrawn. SECURE Act 2.0 reduced that excise tax to 25% — and further reduced it to 10% if the shortfall is corrected within the correction window, generally two years. The IRS may also waive some or all of the tax for a reasonable error when reasonable steps are taken to remedy it.

A 25% penalty on a $30,000 missed RMD is still $7,500. That number gets the attention of most beneficiaries and their advisors.

The IRS provided transition relief for certain missed inherited-IRA RMDs for 2021 through 2024 while the final regulations were being developed. That relief has ended. Starting in 2025, the annual-RMD rules apply, although the IRS may waive some or all of the excise tax for a reasonable error when the beneficiary takes reasonable steps to remedy it.

Spouse vs. Non-Spouse: Completely Different Paths

Surviving spouses have the most flexibility of any beneficiary category. They can:

• Roll the inherited IRA into their own IRA, treating it as if they had always owned it. RMDs then follow the standard rules based on the spouse's own age and the Uniform Lifetime Table — typically producing smaller annual distributions.
• Remain as beneficiary of the inherited IRA, taking distributions based on the deceased spouse's age or their own, depending on which produces a better result.
• Take a lump sum, though this triggers immediate income tax on the entire balance.

Non-spouse beneficiaries have no rollover option. They are limited to the 10-year rule (with or without annual RMDs, depending on whether the original owner had reached their required beginning date) or the life expectancy method if they qualify as an EDB.

What Financial Advisors Get Wrong

Three errors show up repeatedly in inherited IRA administration:

Assuming the 10-year rule means no annual distributions. If the original account holder was already past their required beginning date, annual RMDs are mandatory during the 10-year window. This distinction was ambiguous for years, but the final regulations removed all doubt.

Miscalculating the required beginning date. The required beginning date is generally April 1 of the year following the year the account holder turned 73; it is age 75 for people born in 1960 or later. If the account holder died before reaching this date, a non-eligible designated beneficiary under the 10-year rule generally has no annual RMD before year ten. If the owner died on or after it, annual RMDs are generally required during the 10-year period.

Forgetting to recalculate after the death year. The life expectancy factor for inherited IRA RMDs is set in the year after death using the beneficiary's age and the Single Life Expectancy Table, then reduced by one each year. Advisors who recalculate from scratch annually (using the beneficiary's current age and the table) will produce incorrect — usually smaller — distribution amounts.

Planning the Distribution Strategy

Smart distribution planning for a 10-year inherited IRA is not about minimizing each year's withdrawal. It is about minimizing the total tax paid across all ten years.

If the beneficiary expects their income to vary significantly over the decade — a common scenario for beneficiaries in their peak earning years who anticipate retiring — front-loading distributions during lower-income years can reduce the cumulative tax bill. Conversely, a beneficiary with stable high income might benefit from spreading distributions as evenly as possible to avoid pushing any single year into a higher marginal bracket.

This planning is exactly the kind of work that separates a reactive practice from a proactive one. A structured approach to inherited IRA distribution — documented in a formal protocol with tax projections, annual reviews, and beneficiary communication templates — prevents the year-ten scramble that leads to unnecessary tax liability and client frustration.

The Financial Advisor's Deceased Client Guide includes an inherited IRA distribution planning worksheet designed for this exact scenario, along with the compliance documentation templates that keep the entire estate transition defensible from day one.