Before 2020, an adult child who inherited an IRA could stretch the withdrawals over their own life expectancy. For a 50-year-old that meant small withdrawals spread across thirty-some years. A law called the SECURE Act ended that. Most people who inherit an IRA from someone other than a spouse now have to empty the account by the end of the tenth year after the death.
Ten years sounds generous until you look at which ten years. A parent dies when you're 52, so the account has to be gone by the time you're 62. Your own income is at its peak during exactly those years. Every dollar you pull out of a traditional inherited IRA counts as ordinary income. That means it gets taxed at the same rate as your paycheck, and it stacks on top of it. A $600,000 inherited IRA spread evenly adds $60,000 a year to your taxable income. That can push you into a higher bracket, change what you pay on investment gains, and reach other things that get measured against your income.
The IRS finalized these rules in July 2024 and they took effect in 2025. There's a wrinkle inside them that a lot of people got wrong for four years. Whether you owe a withdrawal every year, or can wait, depends on when the original owner died.
It turns on the required beginning date, which means the age at which the owner had to start taking money out of their own IRA. If the owner died on or after that date, meaning they had already started, then you have to take a withdrawal in each of years one through nine and clear the rest in year ten. If the owner died before that date, there's no yearly requirement. You can take it however you like, as long as the account is empty at the end of year ten.
Some people are out from under the ten-year rule entirely. A surviving spouse. A beneficiary who is disabled or chronically ill. Anyone who is not more than ten years younger than the person who died. And a minor child of the account owner, though the child's exemption ends when they reach adulthood, and the ten-year clock starts running then. A spouse also has choices nobody else gets, including treating the IRA as their own.
An inherited Roth IRA comes under the same ten-year deadline and none of the tax pain, because money out of a Roth isn't taxed when the rules are met. The account still has to be emptied on the same schedule, and emptying it costs you nothing. That's one argument for running Roth conversion numbers while the owner is still alive rather than after.
So the question for the person who owns the IRA today is different from the question facing whoever inherits it. If you're 70, and you know that traditional IRA is going to land on a 50-year-old in their best earning years, you're holding an asset that gets taxed at your child's rate instead of your own. There are three usual answers. Do Roth conversions in your own low-income years. Leave the traditional dollars to a charity and the other assets to the kids. Or move part of it into something that passes with no income tax bill at all. Life insurance sits in that last group, because the death benefit is generally free of income tax to the beneficiary and it skips probate. That mechanic is in why life insurance money skips probate.
I'm a licensed insurance broker and not a CPA. These rules have changed three times in six years. The penalty for missing a required withdrawal is real. Have your accountant confirm which category you're in before the first one. And if you're the one doing the planning rather than the inheriting, start with the beneficiary forms. Those control the account no matter what your will says. The short version is in the five-minute beneficiary checkup.