July 9, 2026

Understanding the rules for inherited IRAs is essential to avoiding costly mistakes. Learn the key differences between spouse and non-spouse beneficiaries, required distributions, and important planning considerations.

An Individual Retirement Account (IRA) is often one of the largest assets a family passes to the next generation. While inheriting an IRA may seem straightforward, the tax rules can be surprisingly complex—and making the wrong decision can have significant financial consequences.

One of the biggest distinctions in inherited IRA planning is whether the beneficiary is a surviving spouse or a non-spouse beneficiary, such as an adult child. The options available to each are very different, and understanding those differences can help families make informed decisions during an already emotional time.

When a Spouse Inherits an IRA

Surviving spouses generally have the greatest flexibility under the tax code.

In most situations, a surviving spouse has several options, including:

• Rolling the inherited IRA into their own IRA
• Treating the account as their own retirement account
• Remaining as the beneficiary of the inherited IRA
• Taking distributions based on their own life expectancy under certain circumstances

Rolling the account into their own IRA is often the most common choice because it allows the assets to continue growing tax-deferred until the spouse reaches the age at which Required Minimum Distributions (RMDs) begin.

However, that isn’t always the best option.

For example, if a surviving spouse is under age 59½ and may need access to the funds, remaining the beneficiary of the inherited IRA could help avoid the 10% early withdrawal penalty that may apply to distributions from their own retirement account.

The right strategy depends on the family’s financial circumstances, income needs, and long-term retirement goals.

When an Adult Child Inherits an IRA

The rules become much more restrictive for most adult children and other non-spouse beneficiaries.

Following changes made by the SECURE Act, many adult children who inherit an IRA are generally required to distribute the entire account within 10 years following the original owner’s death.

Unlike surviving spouses, adult children generally cannot roll the inherited IRA into their own retirement account or continue deferring distributions over their lifetime.

The timing of those withdrawals can significantly affect taxes.

Taking the entire balance in one year could push the beneficiary into a higher income tax bracket. On the other hand, spreading withdrawals over several years may help manage the tax impact, depending on the beneficiary’s individual situation and applicable IRS rules.

Understanding the 10-Year Rule

The 10-year rule does not necessarily mean beneficiaries should wait until the tenth year to withdraw everything.

In many situations, annual Required Minimum Distributions may also apply depending on:

• Whether the original IRA owner had already begun taking Required Minimum Distributions before death
• Current IRS guidance
• The type of retirement account inherited
• The beneficiary’s classification under the tax rules

Because IRS guidance surrounding inherited IRAs has evolved in recent years, it is important to understand the requirements that apply to your specific situation.

Traditional vs. Roth Inherited IRAs

The type of IRA being inherited also matters.

Traditional IRA

Distributions from an inherited traditional IRA are generally taxable as ordinary income.

This makes distribution timing an important tax-planning decision.

Roth IRA

Qualified distributions from an inherited Roth IRA are generally tax-free, provided the account satisfies applicable holding period requirements.

Although many Roth IRA beneficiaries remain subject to the 10-year distribution rule, the absence of income tax on qualified withdrawals provides additional flexibility when planning distributions.

Special Rules for Certain Beneficiaries

Not every non-spouse beneficiary falls under the same rules.

Certain beneficiaries—including surviving spouses, minor children of the account owner (until reaching adulthood), disabled individuals, chronically ill individuals, and certain beneficiaries who are close in age to the original owner—may qualify for different distribution rules under current law.

Determining whether someone qualifies for one of these exceptions requires careful review of the applicable tax rules.

Common Mistakes to Avoid

Inherited IRAs often involve deadlines and elections that cannot easily be reversed.

Some of the most common mistakes include:

• Missing Required Minimum Distribution deadlines
• Waiting until the final year to begin withdrawals without understanding the tax consequences
• Assuming all beneficiaries follow the same rules
• Failing to update beneficiary designations during life
• Not coordinating IRA distributions with an overall estate and tax strategy

Even relatively simple estates can become more complicated when retirement accounts are involved.

Planning Before and After an Inheritance

One of the best opportunities for tax-efficient wealth transfer occurs before an IRA is ever inherited.

Regular beneficiary reviews, Roth conversion strategies when appropriate, charitable planning, and coordination with an overall estate plan can all help families preserve more wealth across generations.

After an inheritance occurs, understanding the available options early can help beneficiaries avoid unnecessary taxes and administrative complications.

Inherited IRAs remain one of the most valuable—and frequently misunderstood—assets families receive. While spouses often have broad flexibility, adult children generally face stricter distribution requirements that require thoughtful planning.

Every family’s circumstances are different, and the tax implications can vary significantly depending on the type of IRA, the beneficiary’s status, and the timing of distributions. Taking the time to understand these rules can help beneficiaries make informed decisions and preserve more of what their loved ones intended to leave behind.

Planning for retirement doesn’t have to be overwhelming. Schedule a complimentary consultation with Omni 360 Advisors and let our team help guide you every step of the way.

This blog was developed with the assistance of AI-based tools for research, drafting and editing support (ChatGPT), and reviewed by OMNI 360 personnel for accuracy and relevance. The information provided is educational and general in nature and is not intended to be, nor should it be construed as, specific investment, tax, or legal advice.