3 Jul

New Inherited IRA Rules You Need to Know

Estate Planning, July 3, 2025

If you’ve inherited an IRA in the past few years, the rules for how you take money out of it have changed — and the IRS has recently clarified some key points. Understanding these updates can help you avoid costly mistakes and ensure you comply with distribution requirements.

The General Rule for Inherited IRAs

When you inherit an IRA, your withdrawal obligations depend on the age and Required Minimum Distributions (RMDs) status of the original account holder at the time of their death.

  • If the original owner was already taking RMDs:
    You must begin taking your own RMDs as the beneficiary.
  • If the original owner had not yet started RMDs:
    You’re still subject to the “10-Year Rule” (explained below), but you may not have to take annual distributions in the same way.

The 10-Year Rule

Regardless of whether RMDs apply, most non-spouse beneficiaries must fully deplete the inherited IRA within 10 years of the original account owner’s death. This rule applies to most inherited IRAs created after January 1, 2020, under the SECURE Act.

What Changed: Annual RMDs Are Now Required in Some Cases

Here’s where the confusion came in:

  • Previously: If you inherited an IRA from someone who had already begun RMDs, you still had 10 years to empty the account — but you didn’t have to take a distribution every year.
  • Now: The IRS has clarified that if the original owner was over 73 (the current RMD age) and taking RMDs, you must also take annual RMDs during the 10-year period, in addition to fully depleting the account by the end of that timeframe.

If the person was under 73 and not yet taking RMDs, the annual RMD requirement does not apply, but you must still follow the 10-Year Rule.

Why This Matters

Missing an RMD can lead to steep IRS penalties — up to 25% of the amount you should have withdrawn (reduced to 10% if corrected quickly). Knowing whether you fall under the new annual RMD requirement is critical to avoid unnecessary costs.

The Bottom Line

If you’ve inherited an IRA from someone who was already taking RMDs, you now have two obligations:

  1. Take annual RMDs based on your life expectancy.
  2. Fully empty the account within 10 years.

If the original account holder was under the RMD age, only the 10-Year Rule applies.

When in doubt, consult a tax professional or financial advisor to ensure you meet all requirements.