Inherited an IRA? Answer These 6 Questions First

Inherited an IRA? Answer These 6 Questions Before You Move a Dollar

If you just inherited an IRA from a parent, the rules that apply to you are not the same rules that apply to everyone else. There is no single answer. There is a decision tree. And each branch leads to a different deadline, a different withdrawal schedule, and a very different tax outcome.

Get even one of these questions wrong and you could trigger unnecessary taxes, miss a key deadline, or make a move that is difficult to undo. The problem is that most beneficiaries do not even know these questions exist.

Inherited IRA planning connects directly to how retirement accounts are structured for transfer. You may also find our video on what happens to retirement accounts when you die helpful for understanding how beneficiary designations affect this process upstream.

Question 1: What Year Did the Original Owner Pass Away?

This is the starting point for everything else. If the account owner passed away in 2019 or earlier, you are under the old rules. In many cases that means you can stretch distributions over your own lifetime, which significantly reduces the annual tax impact.

If they passed away in 2020 or later, you are under the SECURE Act. For most non-spouse beneficiaries, that means the 10-year rule applies. The inherited IRA must be fully distributed by the end of the tenth year after the original owner's death.

Question 2: How Old Was the Original Owner When They Passed?

Specifically, did they pass before or after their required beginning date? Under current law, that is generally age 73. This question changes your obligations significantly.

If they passed before age 73, you may not be required to take annual distributions during the 10-year window. You can let the account grow and withdraw strategically, which gives you meaningful control over your tax picture each year.

If they passed after age 73, you may be required to take annual required minimum distributions every year during the 10-year window and still fully empty the account by the end of year 10. That is a completely different planning scenario with much less flexibility.

Question 3: Who Is Actually Listed as the Beneficiary?

If you are named individually on the beneficiary designation form, you are likely subject to the 10-year rule as described above.

But if no beneficiary was named and the account defaults to the estate, you could fall into a significantly less favorable set of rules. In some cases the account may need to be distributed much faster than the 10-year window would otherwise allow, compressing the tax hit into a shorter period with less room to plan around it.

Question 4: Are You a Spouse or a Non-Spouse Beneficiary?

Surviving spouses have options that no other beneficiary has. The most significant is the ability to treat the inherited IRA as their own. That means rolling it into their own IRA, deferring required minimum distributions based on their own age, and retaining far more flexibility over timing and tax planning.

Non-spouse beneficiaries, including adult children, siblings, and others, typically fall under the 10-year rule without the same rollover options. The strategies available and the deadlines that apply are materially different depending on which category you are in.

Question 5: How Old Are You?

There are specific exceptions under the SECURE Act that allow certain beneficiaries to stretch distributions over their lifetime rather than being subject to the 10-year rule. These beneficiaries are called eligible designated beneficiaries.

You may qualify if you are a minor child of the account owner, if you are disabled or chronically ill, or if you are not more than 10 years younger than the original account owner. Each of these categories has specific definitions and documentation requirements. Qualifying changes your timeline and your tax planning options significantly.

Question 6: Is the Account a Roth or a Traditional IRA?

This is where the tax impact of your inheritance becomes concrete. Same 10-year rule. Completely different financial outcome depending on the account type.

An inherited Roth IRA generally does not require annual distributions inside the 10-year window. The money can continue to grow tax-free, and when you do withdraw it, none of those distributions are taxable. The full account value passes to you without an income tax bill attached.

An inherited traditional IRA is a different situation. You may be required to take annual distributions depending on when the original owner passed relative to their required beginning date, and every dollar you withdraw is taxed as ordinary income in the year you take it. A large inherited traditional IRA distributed over 10 years can push a beneficiary into a significantly higher tax bracket.

For a broader look at how Roth accounts factor into long-term planning, see our video on Roth IRA strategies for high-income earners .

The Six Questions Together

Before making any decisions about an inherited IRA, get clear answers to all six of these questions: the year of the original owner's death, their age at death relative to their required beginning date, who is named as beneficiary, your relationship to the account owner, your own age and whether you qualify as an eligible designated beneficiary, and whether the account is a Roth or traditional IRA.

Once you understand those six variables, you can build the right plan. Without them, even well-intentioned decisions can create tax problems that were entirely avoidable.