Published June 23, 2026

At a Glance

• Your first move isn’t a financial decision — it’s identifying which type of beneficiary you are. That one fact sets every deadline and withdrawal rule that follows.
• The “10-year rule” is the trap most heirs never see coming. Many non-spouse beneficiaries must empty an inherited IRA within ten years — and if the original owner was already taking required withdrawals, you may owe them each year along the way.
• Move deliberately, not quickly. A rushed lump-sum withdrawal can hand a large share of the inheritance to the IRS in a single tax year. The right sequence, not the fastest one, is what protects the money.

Few financial events arrive as tangled up with emotion as an inheritance. When a parent or a spouse leaves you an IRA, you are handed a meaningful gift and a stack of unfamiliar rules in the same breath — and some of those rules carry deadlines you can trip over without ever knowing they were there. Some version of this question reaches me a few times a year, usually a few weeks after a loss, and it almost always opens the same way: “I inherited an IRA. What am I supposed to do with it?”

The honest answer is that it depends on who you are to the account. Once we settle that, the path gets a great deal clearer. Here is how I walk clients through it.

First, figure out what kind of beneficiary you are

Before you touch the money, you need to know your status, because the rules around withdrawals and timing change depending on it. The IRS sorts heirs into a few categories — and which one you fall into drives everything that comes next.

Beneficiary type	Who you are	General withdrawal timeline
Designated beneficiary	Named on the account, but not in the eligible group below (often an adult child).	Empty the account within 10 years.
Eligible designated beneficiary	A surviving spouse, a minor child of the owner, someone no more than 10 years younger, or someone chronically ill or disabled.	Usually exempt from the 10-year rule; can stretch withdrawals over your own life expectancy.
Nondesignated beneficiary	Not named on the account; you inherit it through a will or the estate.	Five years, or continued annual withdrawals — depending on the owner’s age at death.

Most of the people who ask me this question turn out to be designated beneficiaries — an adult child who inherited a parent’s IRA — which means the 10-year rule is usually the part that matters most. We’ll come back to it.

One deadline that’s easy to miss

There’s an early trap worth flagging before we go further. If the person you inherited from was already taking required minimum distributions (RMDs) — the mandatory withdrawals that begin at age 73 — their withdrawal for the year of death still has to come out by December 31 of that year. If it doesn’t, the IRS can assess a 25% penalty on the amount that should have been withdrawn. It’s one of the first things I check, because the clock is often already running by the time we talk.

Your four options

Once you know your status, you generally have four paths. Which one fits depends on your tax picture, your timeline, and what the money is ultimately for.

1. Disclaim it

You can refuse the inheritance — for instance, if accepting it would push you into a higher tax bracket and another family member is better positioned to receive it. A disclaimer has to be made within nine months of the owner’s death, after which the IRA passes to an alternate beneficiary or to the estate. It’s an uncommon move, but a powerful one in the right circumstances — usually as part of a deliberate, family-wide tax plan rather than a snap decision.

2. Take a lump sum

You can withdraw everything at once. With a traditional IRA, the entire amount lands on your tax return as ordinary income that year, which can quietly bump you into a higher bracket and inflate everything from your Medicare premiums to your capital-gains rate. With a Roth IRA the withdrawal is generally tax-free — provided the account has been open at least five years, otherwise a 10% penalty can apply. The money is yours either way; the real question is what it costs you to take it all in a single year, and whether spreading it out would keep more of it in your pocket.

3. Withdraw over time

Often the more tax-efficient route: leave the assets in an inherited IRA, where they keep growing tax-deferred, and draw them down on a schedule. This is the path where the 10-year rule lives — and because the timing differs by beneficiary type, it deserves its own breakdown, just below.

4. Roll it into your own IRA

This option belongs to surviving spouses only. You can move the assets into an IRA in your own name and treat them as though they had always been yours — frequently the simplest and most flexible choice, since it resets you onto the ordinary retirement-account rules. One catch: if the original owner hadn’t taken their required withdrawal for the year, you generally have to take it on their behalf before moving the funds.

The 10-year rule, explained

Since the SECURE Act, most non-spouse beneficiaries can no longer “stretch” an inherited IRA across their lifetime. Instead, how long you have to draw the account down depends on your category. The current distribution rules (IRS Publication 590-B) break down like this:

• Designated beneficiaries (not in the eligible group) must empty the account within 10 years — the clock starting the year after the owner’s death. If the owner had already begun RMDs, you also have to take an annual withdrawal in each of those years, not just a lump sum at the end.
• Eligible designated beneficiaries generally escape the 10-year rule and can stretch withdrawals over their own life expectancy. For a minor child who inherits, the 10-year clock starts ticking at age 21.
• Nondesignated beneficiaries who inherit through an estate face either a five-year deadline or continued annual withdrawals, depending on whether the owner had reached their required-distribution age.

You don’t need to memorize the life-expectancy math — the IRS publishes tables for that, and getting the numbers right is exactly the kind of thing we handle together.

Where people get tripped up

The rules above are knowable, but a few details cause most of the avoidable mistakes I see. The first is treating an inherited IRA like your own and accidentally commingling it with a contributory or rollover IRA. They are legally distinct accounts with different distribution rules, and mixing them creates tracking headaches you do not want. If you are already juggling several retirement accounts and tempted to tidy up, it is worth reading why I usually counsel keeping an inherited account in its own lane.

The second is timing. The year-of-death withdrawal, the 10-year deadline, the five-year Roth aging window — each has a date attached, and the penalties for missing them are steep. These are deadlines worth putting on a calendar the moment the account changes hands.

The third is forgetting that this is an estate-planning moment as much as a tax one. An inherited IRA is a natural prompt to confirm that your own beneficiary designations are current — because the smoothest inheritances are almost always the ones where someone did this work ahead of time.

The bottom line

Inheriting an IRA can feel both meaningful and overwhelming — a reminder that someone cared for you, wrapped in decisions that carry real tax consequences. The most important thing to know is that you don’t have to sort them out alone, and you rarely need to act in a hurry. The early deadlines matter, but most of the choices reward a measured, tax-aware approach over a fast one.

If you’ve recently inherited a retirement account — or you’re the one doing the planning and want to make this easier on the people you love — let’s walk through your situation together before any clocks run out. That’s exactly the kind of question I’m here to help you answer.

Part of TAGStone’s Client Questions series. See also: How Do I Give My Kids a Head Start on Investing?