Inheriting an individual retirement account (IRA) from a loved one can be a windfall—but it also can be one of the trickiest assets to deal with. Reason: An inherited IRA follows many of the rules of traditional and Roth IRAs but also comes with its own set of arcane regulations that can depend on when the original account owner died…whether he/she had already started taking required minimum distributions (RMDs)…and whether the original owner was your spouse.

Bottom Line Personal’s IRA expert Ed Slott, CPA, has already warned readers who inherited IRAs about one land mine—a new federal law requires non-spouses who inherit IRAs after 2019 to empty those IRAs within 10 years of the original owner’s death or face stiff penalties. But Slott says there are plenty of other lesser-known inherited-IRA land mines that can result in big penalties and hefty taxes. Don’t get tripped up by any of these rules…

If the IRA Owner Was Your Spouse

Surviving spouses generally are subject to many of the same rules as non-spouse beneficiaries (see page eight)—but they have more flexibility about what to do with their inherited IRAs and when they must take distributions…


Rule: Surviving spouses are exempted from the 10-year rule on IRAs inherited after 2019. Also exempted are special beneficiaries including disabled or chronically ill people…and a person who is no more than 10 years younger than the IRA owner.

But surviving spouses can elect to use the 10-year rule if the death of the person from whom they inherited the IRA occurred before the deceased began RMDs. Advantage to using the 10-year rule: Surviving spouses don’t have to take RMDs—or they get distribution flexibility—during those 10 years. But, as explained below, spouses likely will do a spousal rollover and take RMDs as an IRA owner rather than as a beneficiary.


Rule: A surviving spouse may retitle the IRA, designating himself/herself as account owner. The contents then can be rolled over into his preexisting IRA. Advantages: Either way, the surviving spouse won’t be required to take an RMD on the money until he reaches age 73.

Alternative: A surviving spouse also can choose to keep the inherited IRA intact and remain its beneficiary. Advantages: The surviving spouse will have to take RMDs on the IRA, but if he is younger than 59½, he will not incur any early-withdrawal penalties on distributions. A surviving spouse also can choose to split up the inherited IRA, rolling over some of it to his own IRA and leaving the balance in the inherited IRA.


Rule: If there are multiple beneficiaries, the IRA can be split into a separate account for each one. This can be a smart choice if one of the beneficiaries is a non-spouse subject to the 10-year rule and the other is a surviving spouse. If you want to split the IRA, you must do so by December 31 of the year following the year of the original owner’s death. Helpful resource: The IRS guide for spousal and non-spousal beneficiaries can be found at (enter “Required Minimum Distributions for IRA Beneficiaries” into the search box in the upper right corner).

Rules for All Beneficiaries

Rule: You cannot make contributions to an inherited IRA. Doing so invalidates the entire IRA and makes all the assets in the IRA immediately taxable. Example: You inherit a $500,000 IRA from your father, then mistakenly contribute $1,000 to it. The IRS will require you to distribute the entire $500,000 and pay ordinary income taxes on it.


Rule: You are not allowed to convert an inherited IRA into an inherited Roth IRA. To move assets from an inherited IRA to a Roth IRA, you would have to take a distribution from the inherited IRA, pay taxes due, then contribute to a Roth IRA in your name. (For 2024, if you are 50 or older, you can contribute a maximum of $8,000 to any IRA. This is a combined limit on how much in total you can contribute to all your IRAs—not to each individually.)

Rule: You can move an inherited IRA to a different custodian/brokerage firm if you don’t like where it’s kept (unless a transfer is prohibited by the existing custodial agreement). You also can invest the money in the IRA in any way that is allowed by that custodian. But follow these steps to avoid taking an unintentional distribution…

Ask the new custodian to move the funds through a direct transfer. If you are a non-spouse beneficiary, you are not allowed to remove the funds from the inherited IRA yourself to roll them into a new account. The funds must be directly transferred from the original custodian to the new one within 60 days.

Make sure the new account is properly set up and titled to conform to tax law. The deceased IRA owner’s name must remain on the new account at the new brokerage firm, as well as the term “inherited IRA.” Example: Title the account “John Smith (Deceased, Date of Death), Inherited IRA, FBO (for the benefit of) Tom Smith, Social Security #, beneficiary.”


Rule: If you inherit an IRA, then pass away yourself, that account goes to the beneficiary named in that inherited IRA custodian’s records, regardless of what your will says. Best: Name a successor beneficiary for the inherited IRA right away. Otherwise, upon your death, the account likely will go to your estate, which could mean additional taxes plus the time and costs of the probate process.


Rule: Distributions from an inherited IRA are never subject to 10% early distribution penalties—even if the beneficiary is under age 59½—but you still must pay tax.


Rule: You may be subject to RMDs. If the deceased owner of the IRA was under RMD age (typically 73), you are not required to take an RMD. But if he/she had reached RMD age, RMDs are required for inherited traditional IRAs but not for inherited Roth IRAs. In either case though, if the beneficiary is subject to the 10-year rule, the full balance in the inherited IRA or Roth IRA must be withdrawn by the end of the tenth year after the original owner’s death. This can mean juggling two mandatory withdrawal schedules for your inherited IRA—one dictated by the 10-year rule, by which time the account must be completely depleted…and taking an annual RMD for Years 1 through 9. The annual RMD for an inherited IRA is based on your own age. See the IRS Single Life Expectancy Table in Publication 590-B at

Also: If the original account owner was required to take an RMD in the year he died but had not yet done so, you are required to take the RMD for him, in the amount that the deceased would have been required to withdraw. Otherwise, you will pay a penalty of 25% (or 10% if the missed RMD amount is made up within two years) of the amount that you failed to distribute. The IRS could waive the penalty in full if you make up the missed RMD amount…then file Form 5329 and request that the penalty be waived for good cause, such as illness, death, confusion about the RMD rules, etc.

New development: There has been so much criticism over requiring beneficiaries to take RMDs from inherited IRAs under the 10-year rule that the IRS has delayed enforcing this law and waived penalties for missed RMDs for 2021, 2022 and 2023. It is unclear what will happen in 2024, so hold off taking any required RMDs until this fall. By then the IRS is likely to make a decision.

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