Attorney
Legal update: October 31, 2026
The inherited-account rules changed after this article was first published. The SECURE Act of 2019 generally replaced lifetime “stretch” distributions with a ten-year payout period for many beneficiaries of account owners who died after 2019. Exceptions remain for eligible designated beneficiaries. The Treasury regulations issued in 2024 apply beginning in 2025 and require annual distributions during that ten-year period in certain cases, including when the owner died on or after the required beginning date. Naming a trust does not automatically preserve lifetime withdrawals. See IRS beneficiary guidance and the 2024 final regulations.
The owner’s starting age and the tax on missed distributions also changed. The former age 70½ rule was replaced by age 72 for the affected 2020-2022 cohort, followed by age 73 for the next cohort beginning in 2023. The applicable age depends on birth year. Current law generally imposes a 25% excise tax on an RMD shortfall, potentially reduced to 10% for timely correction, rather than the former 50% rate. A reasonable-error waiver may be available. See IRS Publication 590-B and the IRS RMD FAQs.
Retirement accounts often represent a substantial part of a family’s wealth. When I help clients plan an inheritance, I want the beneficiary choices, tax rules and family needs to work together. A retirement account deserves separate attention because its transfer and distribution rules differ from those for many other assets.
Traditional IRAs, SEP-IRAs and many 401(k) and 403(b) balances contain tax-deferred funds. Distributions are generally taxable as ordinary income to the extent they represent previously untaxed amounts. After-tax contributions and other account features can affect that result. Roth accounts follow different rules, including requirements for tax-free qualified distributions.
Required Minimum Distributions
A required minimum distribution, or RMD, is an amount federal law requires to be withdrawn for a particular year. The rules depend on whether you are the original owner or a beneficiary, the account type and relevant dates. Your birth date and account history determine the owner’s applicable starting age.
For many traditional IRA owners currently reaching the required age, the applicable age is 73; later birth years are subject to a later statutory starting age. Employer plans can have different retirement-related provisions. Your birth date, plan terms and account history should be checked before choosing a first distribution date.
A missed RMD can trigger an excise tax. Current law generally uses a 25% rate on the shortfall, potentially reduced to 10% when corrected within the applicable correction window. A reasonable-error waiver may be available under IRS procedures. A missed withdrawal should be addressed promptly with a tax adviser.
Inherited Accounts and the Ten-Year Rule
For many individual beneficiaries of owners who died after 2019, the account must be emptied by the end of the tenth year after death. That rule replaced the former broad ability to stretch withdrawals over a beneficiary’s life expectancy. Certain eligible designated beneficiaries have different options, including surviving spouses and qualifying disabled or chronically ill individuals.
The ten-year rule does not always mean that nothing must be withdrawn until year ten. Annual beneficiary RMDs can also apply when the original owner died on or after the required beginning date. Other rules apply when no designated beneficiary qualifies, and the deceased owner’s final RMD may still need completion.
Multiple beneficiaries and separate inherited accounts require careful handling. Appropriate separation, deadlines and the particular beneficiary categories can affect each person’s payout period.
Options for a Surviving Spouse
A surviving spouse generally has options unavailable to a nonspouse beneficiary, including treating an inherited IRA as the spouse’s own when the requirements are met. Keeping it as an inherited account may be preferable in some circumstances, particularly when the spouse needs access before the usual early-distribution age.
The right choice depends on both spouses’ ages, the account, needed withdrawals and the applicable distribution rules. A nonspouse beneficiary cannot simply roll the funds into a personal IRA, but a properly arranged direct transfer to an inherited IRA may be available.
Naming a Trust as Beneficiary
A trust can provide valuable management for a minor, a beneficiary receiving needs-based benefits, or a family that needs continuing safeguards. It should not be rejected automatically or selected without examining the tax consequences.
Qualifying trusts can receive treatment based on their underlying beneficiaries under specific rules. The document, beneficiary identities, distribution provisions and required documentation all matter. Conduit and accumulation provisions can lead to different practical and tax results. Income retained in a trust may also face less favorable income-tax brackets than distributions to individuals.
Do not retitle your retirement account into a revocable living trust during life as though it were an ordinary bank account. Instead, coordinate the appropriate primary and contingent beneficiary designations with the trust and other documents.
Review the Whole Plan
Tax efficiency is one goal, but providing useful, manageable support for the people you care about matters too. We can work with your financial and tax advisers to review account beneficiaries, family circumstances and trust provisions. A coordinated plan helps your beneficiaries understand both what they receive and what they need to do next.
Sources: IRS Publication 590-B; IRS beneficiary distribution guidance; IRS RMD questions and answers; IRS Form 5329 instructions.
Updated October 26, 2026.