By Christian Campbell, Business Development Manager | Updated October 30, 2026

Inheriting a retirement account often comes at a hard time. The rules for what you have to do with it are more complicated than many families expect, and they changed in recent years. Many adult children who inherit an IRA now have to take a withdrawal every year, not just empty the account within ten years. Missing a required withdrawal can mean a penalty.

Here’s how the rules generally work for an IRA inherited from someone who died in 2020 or later.

Step 1: Figure out which kind of beneficiary you are

The rules depend on your relationship to the original owner.

Eligible designated beneficiaries have more flexibility. They generally include:

• A surviving spouse

• A minor child of the account owner (until age 21)

• Someone who is disabled or chronically ill

• Someone not more than 10 years younger than the owner, such as a sibling close in age

Surviving spouses have the most options, including treating the inherited IRA as their own.

Most other individual heirs, including most adult children and grandchildren, are designated beneficiaries subject to the 10-year rule. The account must be fully withdrawn by December 31 of the tenth year after the year the owner died.

Step 2: Check whether the owner had started required withdrawals

This is the detail many heirs miss. Under final IRS regulations, if the original owner had already reached the age when required minimum distributions (RMDs) begin, a designated beneficiary must generally:

1. Take an RMD each year during years one through nine, and

2. Withdraw whatever is left by the end of year ten.

The IRS waived penalties for missed annual withdrawals from 2021 through 2024 while it finalized these rules. Starting in 2025, the yearly withdrawals are required.

If the owner died before reaching RMD age, annual withdrawals generally aren’t required for a designated beneficiary, but the account still has to be emptied by the end of year ten.

Inherited Roth IRAs generally follow the 10-year rule too, but annual withdrawals typically aren’t required because Roth owners don’t have lifetime RMDs.

Step 3: If you missed a withdrawal, fix it quickly

The penalty for a missed RMD is 25% of the amount that should have been withdrawn. It drops to 10% if you take the missed amount within the correction window, generally two years, and file IRS Form 5329. The IRS may waive the penalty entirely when the shortfall was due to reasonable error and you’re taking steps to correct it. A tax professional can help you request a waiver.

The deadline for this year’s required withdrawal is December 31, 2026.

Step 4: Think about taxes across the full ten years

Withdrawals from an inherited traditional IRA are generally taxed as ordinary income in the year you take them. Waiting until year ten to take most of the money can push you into a higher tax bracket that year. Spreading withdrawals more evenly, or timing larger ones for lower-income years such as early retirement, may lower the total tax. For heirs on Medicare, or close to it, larger withdrawals can also raise Medicare premiums two years later.

A few practical cautions

• Don’t mix the inherited IRA with your own IRA. It needs to stay in a properly titled inherited IRA account.

• Use a direct transfer. Non-spouse beneficiaries can’t do a 60-day rollover. Taking a check and redepositing it can make the whole amount taxable.

• Name your own beneficiaries on the inherited account.

Bringing it together

An inheritance doesn’t require every decision at once. Our Family Changes page covers the first steps. If you’d like help building a withdrawal plan alongside your tax professional, talk to an advisor on our Lake Norman team.

This information is educational and is not individualized investment, tax or legal advice. Rules can differ for inherited workplace plans, trusts named as beneficiaries, and deaths before 2020. Inspire Advisors, LLC does not provide tax or legal advice; please consult a qualified tax professional about your situation. Investment advisory services offered through Inspire Advisors, LLC, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Investing involves risk, including possible loss of principal.