Inheriting a parent’s individual retirement account once meant a lifetime of small, tax-advantaged withdrawals stretched across decades. That option is gone for most heirs. Under current law, a non-spouse beneficiary generally has to drain the entire account within 10 years, and a rule that fully took hold in 2025 adds a second obligation many people never saw coming: yearly withdrawals during that decade, not just one final cleanout at the end. The difference decides how large a tax bill lands, and when, on money that arrives at some of the most financially fraught moments in a family’s life.
How the 10-year rule replaced the stretch IRA
For years, an heir could open an inherited IRA and take only a modest required amount each year, calculated on their own life expectancy, letting the balance grow tax-deferred over a long horizon. That “stretch” strategy ended for most beneficiaries when Congress rewrote the rules for account owners who die after 2019. The replacement is blunt: the account must be fully distributed by the end of the tenth year following the year of death.
The compression is the point. Instead of spreading taxable withdrawals across 30 or 40 years, an heir now has a decade, and every dollar pulled from a traditional inherited IRA counts as ordinary income. For an adult child in peak earning years, that can push withdrawals into higher brackets, turning an inheritance into a multi-year tax event rather than a slow supplement. A Roth inherited IRA still must be emptied in 10 years, but its withdrawals are generally tax-free, so the pressure there is about lost tax-free growth rather than a tax bill.
The clock is fixed to the year of death and does not reset. An account inherited from someone who died in 2021 must be empty by the end of 2031, regardless of when the heir gets around to touching it. Waiting until year 10 to take everything at once is legal, but it stacks a decade of deferred income into a single tax year, often the worst possible outcome.
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The annual withdrawal many heirs did not expect
The wrinkle that caught families off guard concerns whether the 10-year window is the only deadline. The answer depends on how old the original owner was. If the person who died had already reached the age at which their own required minimum distributions had begun, the heir cannot simply wait a decade. Annual required distributions must be taken in years one through nine, based on the beneficiary’s life expectancy, with the remaining balance emptied by the end of year 10.
This is the trap embedded in the phrase “required beginning date,” the point at which an account owner had to start their own withdrawals. When death occurs on or after that date, the government does not let the tax deferral pause; the deceased’s distribution schedule effectively continues in the heir’s hands. When death occurs before that date, the yearly requirement does not apply and the heir only has to meet the 10-year deadline, though spreading withdrawals is still usually wiser than a single large one.
The IRS waived the penalty for missed annual withdrawals from 2021 through 2024 while the rules were being finalized, which is why the requirement felt sudden when it became fully enforceable. Heirs who skipped those early years do not have to make them up, but starting in 2025 the annual withdrawal is mandatory for those subject to it, and a missed one carries a penalty. The forgiving grace period is over.
Which heirs escape the yearly requirement
Not everyone falls under the 10-year rule at all. The law carves out a category called eligible designated beneficiaries, who can still stretch distributions over their own life expectancy. A surviving spouse is the clearest example and has the broadest set of options, including treating the IRA as their own. A minor child of the account owner, a disabled or chronically ill beneficiary, and anyone not more than 10 years younger than the deceased also qualify.
The categories are narrower than they sound. A minor child’s exception ends at the age of majority, at which point the 10-year clock starts running, so the stretch is temporary rather than lifelong. Grandchildren, adult children beyond the age gap, and most other relatives do not qualify and land squarely in the 10-year regime, often with the annual-withdrawal obligation attached.
The practical consequence is that two heirs inheriting identical accounts can face very different tax outcomes based entirely on their relationship to the deceased and the deceased’s age at death. Those facts are set the moment someone dies, which is what makes understanding them beforehand valuable. The unresolved question for many families is not whether the tax is owed but how to time a decade of withdrawals so the total bill is as small as the law allows, a calculation the 10-year rule made far less forgiving than the stretch it replaced.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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