Inherited IRA 10-year rule planning matters because most adult children must empty your IRA in 10 years. Roth conversions and heir choices may cut the tax.
The tax on a traditional IRA is deferred, and whoever withdraws the money pays it. If that is a child in their 50s at the height of their career, ten years of withdrawals land on top of their own income. The decisions that change this belong to you, the account owner, and most only work while you are alive.
What is the inherited IRA 10-year rule?
The SECURE Act added the rule in 2019 for account owners who die on or after January 1, 2020. When an IRA passes to a designated beneficiary who is not an eligible designated beneficiary, the account must be emptied by the end of the 10th year following the year of the owner's death. A death in 2026 means a deadline of December 31, 2036.
Withdrawals from an inherited traditional IRA are generally taxable income to the heir. The account also gets no step-up in basis at death, because the tax code treats it as income in respect of a decedent rather than as appreciated property.
A traditional IRA carries a tax bill nobody has paid yet. The 10-year rule decides how fast it comes due, and in whose bracket.
- Designated beneficiary
- An individual you name on the IRA's beneficiary form. Your estate, a charity, or another entity is not one.
- Required beginning date
- When required minimum distributions (RMDs) from your traditional IRA must start: April 1 of the year after you reach your applicable age, which is 73 if you were born from 1951 through 1958 and 75 if you were born in 1960 or later (the statute's wording overlaps for 1959, and the final regulations leave that year open). Roth IRA owners have no lifetime RMDs.
- Step-up in basis
- The reset of an inherited asset's cost basis to its value at the owner's death, so earlier gains are not taxed to the heir. Retirement accounts do not get it.
Who counts as an eligible designated beneficiary?
The tax code names the beneficiaries who avoid the 10-year rule, at least for a while. Status is decided as of the date of the owner's death.
| Beneficiary | How long withdrawals can last | What to know |
|---|---|---|
| Surviving spouse | Life expectancy, or roll the IRA into their own | Your children usually meet the 10-year rule later, when they inherit from your spouse. |
| Your child under 21 | Life expectancy until 21, then 10 more years | Your own child, not a grandchild. Empty by the end of the year the child turns 31. |
| Disabled or chronically ill beneficiary | Life expectancy | Must meet the tax code's definition as of the owner's death. |
| Someone not more than 10 years younger than you | Life expectancy | Often a sibling, measured by dates of birth. |
| Adult child or grandchild (no exception applies) | Empty by the end of year 10 | Where most heirs of business owners and pre-retirees land. |
| Your estate, a charity, or another entity | Not a designated beneficiary | Older payout rules apply instead. |
If your heirs are grown children, plan as though every pre-tax dollar will be withdrawn and taxed within ten years of your death.
Do your heirs have to take withdrawals every year?
It depends on when you die relative to your required beginning date.
- Before it: an heir under the 10-year rule has no required withdrawal until the 10th year, as long as the account is empty by the deadline.
- On or after it: final IRS regulations require the heir to take an annual required minimum distribution each year after your death and to empty the account by the end of year 10.
Many beneficiaries expected the second case to work like the first. The IRS proposed the annual requirement in 2022, then waived the penalty for certain missed annual withdrawals for 2021 through 2024 (Notices 2022-53, 2023-54 and 2024-35). The final regulations apply to distributions for 2025 and later. A missed required distribution now carries an excise tax of 25% of the shortfall, reduced to 10% if corrected within the correction window.
Once you pass your required beginning date, your children inherit a yearly withdrawal schedule along with the account.
Why can your children pay more tax on your IRA than you would?
Timing. A parent who lives into their late 80s often leaves the IRA to children in their 50s or 60s, which can be their highest-earning years. Waiting to take it all in the 10th year, possible only when the owner dies before the required beginning date, can push most of it into the top brackets.
For the 2026 tax year, married couples filing jointly pay 24% on taxable income over $211,400, 32% over $403,550, 35% over $512,450 and 37% over $768,700. These figures are adjusted every year, so confirm the current-year numbers before acting. The hypothetical below uses those brackets and ignores investment growth and state tax.
| Hypothetical situation | Other taxable income | IRA income added that year | Top 2026 federal rate reached |
|---|---|---|---|
| Retired parents convert part of their IRA to a Roth | $120,000 | $150,000 | 24% |
| Adult child and spouse spread a $1,500,000 inherited IRA evenly over 10 years | $300,000 | $150,000 | 32% |
| The same couple takes the whole $1,500,000 in year 10 | $300,000 | $1,500,000 | 37% |
The question is not whether the IRA gets taxed. It is whose bracket it gets taxed in.
What does inherited IRA 10-year rule planning look like while you are alive?
None of these moves fits everyone, and each has a cost.
Convert part of the IRA to a Roth in lower-bracket years
A Roth conversion moves money from a traditional IRA to a Roth IRA. The taxable part of the conversion is included in your gross income that year (after-tax basis is not taxed again), so the tax is paid at your rate instead of your children's. The years between retiring and your first RMD are often your lowest-income years. Our articles on RMD tax planning before age 73 and Roth conversion timing cover how conversions are sized and what else moves when income rises.
For heirs, a Roth changes two things. Qualified distributions are excluded from income: the Roth must meet a five-taxable-year holding period, and the payment must be made on or after age 59½, to a beneficiary after the owner's death, or on another qualifying event. The clock starts with your first Roth contribution or conversion, and heirs keep the time you have already counted. And because the rules treat a Roth owner as having died before the required beginning date, an heir under the 10-year rule generally has no required withdrawal until the 10th year.
The cost is real: tax paid today with money that could stay invested. Whether it helps depends mostly on your rate now versus your heirs' rate later, and on whether the tax is paid from money outside the IRA. That comparison is worth running with your CPA before each conversion, alongside the order you draw from your accounts.
Match each asset to the heir it fits
| Asset left at death | Tax treatment for the heir | May suit |
|---|---|---|
| Traditional IRA | Withdrawals taxed as income, generally within 10 years; no step-up | Heirs in lower brackets, or charity |
| Roth IRA | Qualified distributions excluded from income; generally emptied within 10 years | Heirs in high brackets |
| Taxable brokerage account | Basis generally steps up to value at death | Heirs in high brackets |
| Any account left to a 501(c)(3) charity | A tax-exempt charity generally pays no income tax on it | Charitable goals |
Splitting a large IRA among more adult beneficiaries also spreads the withdrawals across more tax returns, though each share still falls under the 10-year rule.
Give pre-tax dollars to charity
If you plan to leave money to charity anyway, the traditional IRA is often the most tax-efficient asset to give, because a tax-exempt charity does not pay the income tax your children would. One caution: a charity sharing an IRA with your children can leave the account treated as having no designated beneficiary. The regulations allow a fix by paying the charity's share out by September 30 of the year after your death. A separate IRA for the charitable share is simpler.
You can also give while alive. Once you reach age 70½, a qualified charitable distribution paid directly from your IRA to a charity is excluded from your income, up to $111,000 for the 2026 tax year. Donor-advised funds and supporting organizations do not qualify.
Keep beneficiary forms and trusts current
Your IRA passes by its beneficiary form, so that form is where the plan is carried out. A spouse named first can roll the account into their own IRA and keep converting or giving before the children inherit. A trust named as beneficiary can add control over a child's share, but its drafting under the see-through trust rules decides how fast the IRA is paid out. That is attorney work. Our estate planning checklist before retirement covers reviewing beneficiary forms with the rest of your plan.
These moves land on your tax return and estate documents at once, so your CPA, advisor and attorney need to work from one plan. Anchor provides tax strategy, planning and coordination; your CPA prepares the returns and your attorney drafts the documents.
Every one of these levers has to be set while you are alive. After your death, your heirs' choices narrow mostly to timing inside a ten-year window.
Frequently asked questions
Does the 10-year rule apply if I leave my IRA to my spouse?
Generally no. A surviving spouse is an eligible designated beneficiary and can take withdrawals over their life expectancy or roll the account into their own IRA. The 10-year rule usually reaches your children when they later inherit from your spouse.
Does the 10-year rule apply to an inherited Roth IRA?
Yes. An adult child who is not an eligible designated beneficiary must empty an inherited Roth IRA by the end of the 10th year after the owner's death, but generally needs no withdrawal before that final year. Qualified distributions are excluded from the heir's income once the five-taxable-year period is met.
Is a grandchild an eligible designated beneficiary?
Generally no. The minor-child exception covers only the account owner's own child under 21, so a grandchild usually falls under the 10-year rule unless the grandchild is disabled or chronically ill.
What happens if my child misses a required annual withdrawal?
An excise tax of 25% of the shortfall applies, reduced to 10% if the missed amount is taken and reported within the correction window. The IRS waived the penalty for certain missed annual withdrawals under the 10-year rule for 2021 through 2024.
Should I name a trust as my IRA beneficiary?
A trust can control how and when a child receives the money, but its drafting decides how fast the IRA must be paid out, so it is work for an estate attorney and your CPA together.
Sources
- 26 U.S.C. 401(a)(9), Cornell Legal Information Institute, the 10-year rule in 401(a)(9)(H), eligible designated beneficiaries in 401(a)(9)(E)(ii), and the required beginning date and applicable age in 401(a)(9)(C).
- IRS, Retirement Topics - Beneficiary, the 10-year deadline, the spouse rollover option, and taxation of inherited distributions.
- 26 CFR 1.401(a)(9)-5, Cornell Legal Information Institute, annual distributions when the owner dies on or after the required beginning date, and the year the account must be empty.
- 26 CFR 1.401(a)(9)-4, Cornell Legal Information Institute, age of majority at 21, non-individual beneficiaries, see-through trusts, and the September 30 determination date.
- 26 CFR 1.401(a)(9)-1, Cornell Legal Information Institute, the rule's effective date for deaths on or after January 1, 2020, and the final regulations applying from 2025.
- IRS, Internal Revenue Bulletin 2024-19 (Notice 2024-35), penalty relief for certain missed annual withdrawals for 2021 through 2024.
- IRS, Retirement Topics: Required Minimum Distributions (RMDs), RMDs beginning at age 73 and the April 1 required beginning date for IRAs.
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements, no distribution required before the 10th year when the owner dies before the required beginning date, and Roth IRA rules after death.
- 26 U.S.C. 408A, Cornell Legal Information Institute, conversions included in gross income, qualified distributions, and no lifetime RMDs for Roth IRA owners.
- IRS Publication 590-A, Contributions to Individual Retirement Arrangements, conversion income and the exclusion for a return of basis.
- 26 CFR 1.408A-6, Cornell Legal Information Institute, Roth IRA owners treated as dying before the required beginning date, and the five-taxable-year period carrying to heirs.
- 26 U.S.C. 1014, Cornell Legal Information Institute, step-up in basis at death and its exclusion for income in respect of a decedent.
- 26 U.S.C. 4974, Cornell Legal Information Institute, the 25% excise tax on missed required distributions and the 10% corrected rate.
- IRS news release IR-2025-103, tax year 2026 inflation adjustments, the 2026 federal income tax brackets.
- 26 U.S.C. 408(d)(8), Cornell Legal Information Institute, qualified charitable distributions from age 70½ and the organizations that can receive them.
- Internal Revenue Bulletin 2025-49 (Notice 2025-67, 2026 cost-of-living adjustments), the $111,000 qualified charitable distribution limit for 2026.
- 26 U.S.C. 501, Cornell Legal Information Institute, income tax exemption for charitable organizations.
This article is for educational purposes only and does not constitute financial, tax, or legal advice. Anchor Financial Group is a registered investment adviser; investing involves risk, including the possible loss of principal, and past performance does not guarantee future results. Consult a qualified advisor about your specific situation.
