Mike Crews | Apr 21 2026 16:00

Inheriting a retirement account can be a meaningful financial opportunity, but recent IRS rules have made the decisions more complex and time‑sensitive. The right approach can help you manage taxes, protect your inheritance, and align it with your long‑term goals.

Understanding Today’s Inherited IRA Rules

When you inherit a retirement account—such as a traditional IRA, Roth IRA, or 401(k)—you face specific IRS rules on how and when you must take money out. The SECURE Act and SECURE 2.0 significantly changed these rules, especially for non‑spouse beneficiaries inheriting accounts from someone who passed away in 2020 or later.

Most non‑spouse beneficiaries must now fully distribute inherited IRA or retirement plan assets by the end of the 10th year after the original owner’s death, with additional annual required minimum distributions (RMDs) in some situations. The rules depend on your relationship to the decedent, the type of account, and whether the original owner had already begun RMDs.

Key Beneficiary Categories

Spouse Beneficiaries

Spouses often have the most flexibility, including the ability to roll the inherited account into their own IRA and follow their own RMD rules.

Eligible Designated Beneficiaries (EDBs)

EDBs typically include surviving spouses, minor children of the account owner (until a specified age), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the decedent. These beneficiaries may use lifetime “stretch” distributions or elect the 10‑year rule in some cases.

Non‑Eligible Designated Beneficiaries

Most adult children and other individual heirs fall here. They generally must empty the inherited account by the end of year 10 and may be required to take annual RMDs during that period if the original owner had started RMDs.

Non‑Person Beneficiaries

Estates and certain trusts follow separate rules that may be more restrictive and depend on whether the original owner died before or after their required beginning date.

How and When You Take Distributions

10‑Year Clean‑Out Rule

Most non‑spouse, non‑EDB beneficiaries must fully distribute the inherited account by December 31 of the 10th year following the year of death. If the original owner had already started RMDs, annual RMDs in years 1–9 may also be required.

Life Expectancy (Stretch) Distributions

Eligible designated beneficiaries may be able to take RMDs over their life expectancy, reducing annual tax impact and extending tax‑advantaged growth.

Spousal Options

A spouse may treat the IRA as their own, roll it into their own IRA, or maintain it as an inherited IRA—each with different tax and RMD implications.

Because missing RMDs can trigger penalties, it's essential to confirm which rule applies before taking—or delaying—distributions.

Tax Implications: Traditional vs. Roth

Inherited Traditional IRA or 401(k)

Distributions are taxed as ordinary income. Large withdrawals may increase your tax bracket or affect Medicare premiums and Social Security taxation.

Inherited Roth IRA

If the original Roth IRA met the 5‑year rule, withdrawals are generally tax‑free—even though beneficiaries must still follow the 10‑year rule (unless they are EDBs). This can create significant tax‑free flexibility when timed strategically.

What You Can Do With the Inherited Account

Spouse Options

  • Roll the inherited assets into your own IRA and follow your own RMD timeline.
  • Keep the funds in an inherited IRA, which may be beneficial if younger than 59½ and needing access without early withdrawal penalties in certain situations.

Non‑Spouse Options

  • Maintain the account as an inherited IRA and follow the applicable 10‑year or life‑expectancy rules.
  • Roll over inherited employer plan assets (if allowed) to an inherited IRA.
  • Inherited IRAs cannot be combined with your own IRA balances.

Because each option carries tax and timing implications, avoid moving or cashing out funds before understanding the consequences.

Can You Do a Roth Conversion on an Inherited Account?

Spouse Beneficiaries

A spouse may roll inherited assets into their own traditional IRA and then consider a Roth conversion under standard rules.

Non‑Spouse Beneficiaries

Current IRS rules do not allow non‑spouse beneficiaries to directly convert an inherited IRA to a Roth IRA. Non‑spouse beneficiaries may take taxable distributions and then make contributions or conversions in their own accounts, subject to rules and limits.

Strategic Considerations for Your Situation

  • Managing your tax bracket: Spreading withdrawals may help avoid large spikes in taxable income.
  • Coordinating with retirement timing: Low‑income years may offer opportunities to accelerate distributions.
  • Protecting benefits: Withdrawals can affect Medicare IRMAA and Social Security taxation.
  • Estate and legacy planning: Decisions today impact what you ultimately pass to beneficiaries.

How Forum Advisory Services Can Help

Today’s inherited IRA and retirement plan rules are more complex than ever. A misstep can result in unexpected taxes or penalties. Forum Advisory Services helps you navigate these rules with clarity and confidence so you can honor your loved one’s legacy while making informed financial decisions.

When you work with Forum Advisory Services, we help you:

  • Identify your beneficiary category and the IRS rules that apply.
  • Design a distribution strategy balancing taxes, cash flow, and long‑term growth.
  • Coordinate inherited account decisions with your broader retirement, tax, and estate plans.
  • Avoid common mistakes that trigger penalties or accelerate taxes unnecessarily.

If you’d like help evaluating your options, you can schedule a no‑obligation Discovery Visit so we can learn more about your goals and outline a personalized strategy for your inherited IRA or retirement plan assets.

Important Disclosure

This material is for informational and educational purposes only and is not intended as tax, legal, or accounting advice. You should consult your tax and legal advisors regarding your individual situation. Rules for inherited IRAs and retirement plans, including RMD requirements and the 10‑year rule, are complex and may change based on future legislation or IRS guidance.