Required Minimum Distribution Inherited IRA

Why Inherited IRA RMDs Trip Up So Many Families

You inherit an IRA, and within days the custodian sends paperwork asking about your "distribution election." The form assumes you already know how inherited IRA required minimum distributions work — what category of beneficiary you fall into, whether the original owner had started taking RMDs, and which IRS table to use for calculations. Most people inheriting an IRA for the first time have never encountered any of this.

The rules changed dramatically under the SECURE Act of 2019, and the IRS didn't finalize the regulations until July 2024. That three-year gap created widespread confusion that's still playing out at kitchen tables and in accountants' offices across the country.

The Three Beneficiary Categories That Determine Everything

The IRS splits inherited IRA beneficiaries into three groups, and your category dictates your entire distribution schedule:

Eligible Designated Beneficiaries (EDBs) include surviving spouses, disabled or chronically ill individuals, minor children of the deceased (under 21), and anyone not more than 10 years younger than the original owner. EDBs can still stretch distributions over their own life expectancy using the Single Life Table — the old "stretch IRA" that most non-spouse beneficiaries lost.

Designated Beneficiaries are named individuals who don't qualify as EDBs — typically adult children, siblings, nieces, nephews, or friends. These beneficiaries must fully deplete the inherited IRA by December 31 of the year containing the 10th anniversary of the owner's death.

Non-Designated Beneficiaries are entities rather than people: estates, charities, and certain trusts. If the original owner died before their Required Beginning Date, the account must be emptied within five years. If death occurred after the RBD, distributions are taken over the deceased's remaining single life expectancy.

The Annual RMD Trap Inside the 10-Year Window

Here's where the confusion gets expensive. If you're a designated beneficiary subject to the 10-year rule, whether you must take annual RMDs in years one through nine depends entirely on whether the original owner died before or after their Required Beginning Date.

Owner died before RBD (age 73 for people born 1951–1959, age 75 for those born in 1960 or later, and an earlier age for prior cohorts): No annual RMDs are required during the 10-year window. You can leave the money untouched for nine years and withdraw the entire balance in year 10 if you want — though that's usually a terrible tax strategy.

Owner died on or after their RBD: You must take annual life-expectancy RMDs in years one through nine, based on the longer of your single life expectancy and the owner's remaining life expectancy under the IRS Single Life Table. The applicable factor decreases by 1.0 each subsequent year. Whatever remains in the account after year nine must come out by December 31 of year 10.

The IRS waived penalties for missed annual RMDs within the 10-year window for tax years 2021 through 2024 while it sorted out the final regulations. That relief ended December 31, 2024. Starting with the 2025 tax year, annual RMDs are mandatory for beneficiaries whose account owners died after their RBD.

Year-of-Death RMD: The Obligation the Custodian Won't Calculate for You

If the original IRA owner died during the year after reaching their RBD but before taking their full RMD for that year, someone has to complete it. That obligation falls on the beneficiaries — not the estate, unless the estate is the beneficiary.

The custodian will not calculate this for you. They'll send you a date-of-death valuation statement, but the actual RMD math is your responsibility. The calculation uses the prior-year December 31 account balance divided by the table factor the owner would have used: generally the IRS Uniform Lifetime Table, or the Joint and Last Survivor Table if the sole beneficiary was a spouse more than 10 years younger.

This year-of-death RMD must be distributed by December 31 of the year of death. Miss it, and you face a 25% excise tax on the shortfall — reduced to 10% if you correct the error within two years by filing Form 5329 with an explanation.

How Surviving Spouses Get Different Options

Surviving spouses who are sole beneficiaries have three distinct paths, and each creates a fundamentally different tax trajectory:

Spousal rollover treats the inherited IRA as the spouse's own. RMDs don't begin until the surviving spouse reaches their own RBD. This works well when the surviving spouse is younger and wants to delay withdrawals.

Inherited IRA election keeps the account in the deceased spouse's name. The surviving spouse takes distributions based on their own recalculated life expectancy. This matters when the surviving spouse is under 59½ and needs penalty-free access to the funds.

SECURE 2.0 Section 327 election (for employer plans like 401(k)s) lets the surviving spouse be treated as the deceased employee for RMD purposes, using the more favorable Uniform Lifetime Table rather than the Single Life Table. If the deceased died before their RBD, the spouse's first RMD is deferred until the year the deceased would have reached their applicable RMD age.

Calculating Your Annual RMD: A Worked Example

Say your mother died in 2025 at age 78 (after her RBD), and you're a 52-year-old adult child — a designated beneficiary, not an EDB. Her traditional IRA was worth $400,000 on December 31, 2024.

Year-of-death RMD (2025): Assuming the Uniform Lifetime Table applies, its factor for age 78 is 22.0. The 2025 RMD is $400,000 ÷ 22.0 = $18,182. This must be withdrawn by December 31, 2025.

Your annual RMDs (2026–2034): After the year-of-death RMD, your own annual RMDs begin. Using your age (53 in 2026) and the Single Life Table, your life expectancy factor is approximately 33.4. Each subsequent year, that factor decreases by 1.0. You must empty whatever remains by December 31, 2035 — the end of the 10-year window.

The Penalty Math That Makes Compliance Non-Negotiable

Missing a required distribution triggers a 25% excise tax on the amount you should have withdrawn but didn't. On a $33,000 RMD, that's $8,250 in penalties alone — on top of the ordinary income tax you'll owe when you eventually take the distribution.

The SECURE 2.0 Act added a correction window: if you fix the missed RMD within two years and file a corrected Form 5329, the penalty drops to 10%. That's still $3,300 on the same missed distribution.

The stakes multiply when beneficiaries don't realize they're subject to annual RMDs within the 10-year window. A beneficiary who plans to wait until year 10 — not realizing annual distributions were required because the owner died after their RBD — could face penalties on every missed year.

What to Do Right Now If You've Inherited an IRA

Start by getting a date-of-death valuation statement from the custodian and finding out whether the original owner had reached their Required Beginning Date. Those two facts determine your entire obligation.

If you're dealing with multiple inherited accounts, complex trust structures, or an owner who died after their RBD, a CPA who specifically handles inherited retirement accounts can model multi-year distributions to minimize your total tax burden across the 10-year window.

For a structured walkthrough of the entire inherited IRA claim process — from custodian notification through RMD compliance — the Retirement Account Claims toolkit covers each step with document checklists, tax worksheets, and custodian scripts.

The rules aren't intuitive, but they are specific. Getting the beneficiary category and the RBD question right at the start prevents every downstream problem.