Here’s what HIVE AI had to say about “What are the rules for inherited IRAs and 10-year payout?”:
Inherited IRAs and the 10-year payout rule
What changed: the SECURE Act’s 10-year rule
- For most non-spouse “designated beneficiaries,” an inherited IRA (traditional or Roth) must be fully distributed by December 31 of the 10th year after the year of the original owner’s death. If the owner died in 2024, the account must be emptied by December 31, 2034. Eligible designated beneficiaries (EDBs) may use life expectancy payouts; when an EDB dies, any successor beneficiary must finish distributions by the end of the 10th year after the EDB’s death. 1
- IRS guidance explains that when the 10-year rule applies and the owner died before their required beginning date (RBD), no annual distributions are required in years 1–9; the entire balance just has to be out by the end of year 10. 2
Who can use life expectancy instead of the 10-year rule
- Only “eligible designated beneficiaries” can take annual required minimum distributions (RMDs) using the life expectancy method. If an EDB later dies (or if the EDB was the owner’s minor child, when that child reaches majority), the remaining balance must be distributed by the end of the 10th year after that event. 1
- Publication 590-B reflects these rules and the 10-year timing upon the EDB’s death or a child’s attainment of majority. 2
Are annual RMDs required during the 10-year period?
- If the owner died before the RBD and the 10-year rule applies, IRS guidance states there are no annual RMDs required until the deadline in year 10. 2
- The IRS has acknowledged confusion about whether annual RMDs are required during years 1–9 when the owner died on or after the RBD, noting commenters expected the 10-year rule to operate like the 5-year rule with no annual RMDs before the final year. Monitor IRS updates and your custodian’s requirements because administrative relief has been provided in prior years while regulations are finalized. 3
Special rules for Roth IRAs
- While Roth IRA owners have no lifetime RMDs, after death the same post-death minimum distribution framework applies: in general the entire interest must be distributed by the 5th or 10th year, unless payable over an EDB’s life expectancy. 2
Spousal beneficiaries: your choices
- A surviving spouse who inherits a traditional IRA generally can: treat it as their own IRA, roll it into their own IRA or certain plans, or keep it as an inherited IRA and be treated as a beneficiary. Your choice affects which post-death rule (life expectancy vs 10-year) applies and when RMDs must begin. 4
- Proposed rules also describe circumstances where a surviving spouse (or certain non-spouse beneficiaries using a direct trustee-to-trustee transfer) can cause the receiving inherited IRA to use the life expectancy method if the election is made by the applicable deadline; otherwise, the 10-year deadline continues to apply after a later-year transfer. 5
Non-spouse beneficiaries: transfers and rollovers
- A non-spouse beneficiary cannot roll over distributions from an inherited IRA; inherited IRA amounts are not eligible for the 60‑day rollover. IRAs are subject to the RMD framework of section 401(a)(9), and inherited IRAs retain that status. 6
Deadlines, penalties, and exceptions
- If the 10-year rule applies and any balance remains after the deadline, it’s treated as an “excess accumulation” subject to an excise tax. Publication 590‑B warns that amounts remaining after the applicable 5-year or 10-year deadline can trigger this tax; plan distributions well ahead of the final year to avoid it. 2
- Distributions from an inherited IRA to a beneficiary are not subject to the 10% early distribution tax. However, if a surviving spouse elects to treat the account as their own and then withdraws before 59½, the 10% additional tax can apply. 2
Practical administration notes
- If multiple beneficiaries split an inherited IRA into separate inherited IRAs via trustee‑to‑trustee transfers, each beneficiary’s RMDs and tax obligations are determined separately for their inherited IRA, and taxes/penalties do not carry to the decedent’s trust. 7
- IRAs follow the plan minimum distribution framework under section 401(a)(9) by cross-reference; the IRA custodian/issuer is treated as plan administrator for these purposes. 6
Quick examples
- Non-spouse beneficiary of an owner who died in 2024: must empty the inherited IRA by December 31, 2034; no annual RMDs are required if the owner died before their RBD. 2
- Eligible designated beneficiary using life expectancy: takes annual RMDs under life expectancy. When that EDB dies, the successor beneficiary must finish payouts by the end of the 10th year after the EDB’s death. 1
Sources
1 – Notice 2022-53 📄 Summarize
2 – IRS – Publication 590-B Distributions from Individual Retirement Arrangements (IRAs) 📄 Summarize
3 – Notice 2024-35 📄 Summarize
4 – IRS – Publication 590-A Contributions to Individual Retirement Arrangements (IRAs) 📄 Summarize
5 – REG-105954-20 📄 Summarize
6 – PLR-116072-20 📄 Summarize
7 – PLR-109140-24 📄 Summarize
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