Inherited IRAs: The 10-Year Clock and the Decade of Decisions It Starts

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Inheriting a retirement account used to come with a lifetime stretch: heirs could sip withdrawals across their own life expectancy. That era ended with the SECURE Act. Today most non-spouse heirs face the 10-year rule — the account must be empty by December 31 of the tenth year after death — and inside that decade sits a genuine tax-planning project most heirs don’t realize they’ve been handed.

The rules, by who you are

Spouses keep the full menu: roll it into your own IRA (usually best — your own RMD schedule, your own beneficiaries), remain a beneficiary (useful if you’re under 59½ and need penalty-free access), or use the newer spousal election options. This decision has real consequences either way; don’t let the custodian’s default make it.

Eligible designated beneficiaries — minor children of the deceased (until majority, then the 10-year clock starts), disabled or chronically ill heirs, and heirs within 10 years of the decedent’s age — still get life-expectancy stretch treatment.

Everyone else — adult children, grandchildren, siblings, friends — gets the 10-year rule. And the detail that confused everyone for years, now settled: if the original owner had already begun RMDs, heirs must also take annual RMDs during years 1–9 (based on the heir’s life expectancy), not just empty it by year ten. Died before RMDs began? No annual requirement — just the year-ten deadline. Missed annual RMDs carry the standard penalty (the IRS waived early transition years; that grace has ended).

No beneficiary named / estate inherits: worse timelines (as short as five years) — the strongest argument for the beneficiary-form audit covered below.

The real project: spreading the income

Ten years of forced distributions from a large pre-tax IRA is a bracket problem. A $700,000 inherited IRA emptied lazily — or all in year ten — can land six figures of income on your peak earning years at 35%+. The planning:

  • Map your own income decade: front-load withdrawals into low years (a sabbatical, early retirement, a between-jobs year), go light in bonus years. The 10-year rule is a budget, not a schedule — beyond any required annual RMDs, you choose the shape.

  • Coordinate with everything else competing for bracket space: your own Roth conversions, 0%-bracket harvesting, IRMAA cliffs if you’re 63+.

  • Inherited Roth IRAs also follow the 10-year rule but distributions are tax-free — the optimal move flips: let it grow untouched until year ten.

  • NJ note: inherited IRA distributions carry the decedent’s unrecovered NJ basis if anyone tracked it — worth excavating from old returns.

For the original owners reading this

The 10-year rule rewrote estate planning upstream: pre-tax balances now dump onto heirs’ peak brackets, which strengthens the case for lifetime Roth conversions (paying tax at your retiree rates instead of their lawyer/doctor rates), naming the right beneficiaries per account, and — for charitable estates — leaving IRAs to charity and other assets to family. And the perennial: beneficiary forms override wills. Audit them after every life event; the 10-year clock is unforgiving, but it’s nothing compared to the ex-spouse still named on a form from 2009.

Romanchuk CPA LLC is a fully virtual CPA firm serving individuals, families, and business owners nationwide since 2014, with NJ/NY depth. Book a consultation at rfg.tax.

This article is general information, not tax advice for your specific situation. Figures adjust annually — verify current amounts.