There seems to be a great deal of confusion about the required minimum distributions from inherited IRAs. A wide variety of factual situations can occur, making a simple explanation impossible. The following chart attempts to summarize the new rules for inherited IRA distributions. Due to confusion, the IRS has provided relief for beneficiaries who inherited IRAs between 2020 and 2025. Starting in 2026[1], the following rules will be enforceable. In the interim, taxpayers are expected to make a good-faith and reasonable effort to comply.
An eligible designated beneficiary of an inherited retirement account includes minors of the deceased, disabled or chronically ill individuals, those within 10 years of the original account holder’s age, and certain qualifying trusts.
Under the 10-year rule, beneficiaries must fully distribute the account within 10 years of the account holder’s or beneficiary’s death. Spreading withdrawals over 10 years, rather than taking a lump sum, can help optimize tax management and maintain stable income levels. However, it’s essential to carefully assess the recipient’s financial situation and anticipate future tax rates to determine the most effective strategy.
Under the 5-year rule, the account must be emptied within five years of the account holder’s death. Notably, 2020 does not count toward this timeline, and withdrawals are only required by the final year, allowing flexibility for distribution planning.
Further consideration is necessary for more nuanced situations involving SEPs and SIMPLE IRAs, Roth IRAs, accounts with multiple beneficiaries, and trusts, including scenarios where the spouse is the sole beneficiary or other non-individual beneficiaries are involved.
As always, please contact your Dent Moses advisor with any questions or concerns.
[1] IRB 2025-02 (Rev. 1-6-2025)
[2] Retirement topics – Beneficiary | Internal Revenue Service
[3] Retirement topics – Beneficiary | Internal Revenue Service
