The SECURE Act introduced significant changes to how inherited retirement accounts—such as IRAs and 401(k)s—must be distributed. These new rules affect many beneficiaries and can have meaningful implications for taxes, cash flow, and long-term planning.
This article provides a high-level overview of the 10-year rule and explains how distribution requirements vary depending on the type of beneficiary.
Key Changes Under the SECURE Act
The SECURE Act of 2019 changed the distribution rules for retirement accounts inherited from individuals who passed away after December 31, 2019. The rules a beneficiary must follow depend on how they are classified under the law.
Beneficiaries generally fall into one of two categories:
- Eligible Designated Beneficiaries (EDBs)
- Designated Beneficiaries (DBs)
Understanding which category applies is the first step in determining distribution options.
Eligible Designated Beneficiaries
Eligible Designated Beneficiaries have greater flexibility in how inherited retirement accounts may be distributed. This group includes:
- Surviving spouses
- Minor children of the account owner (until they reach the age of majority)
- Chronically ill individuals
- Permanently disabled individuals
- Individuals who are not more than 10 years younger than the original account owner
Each category comes with specific planning opportunities and considerations.
Spousal Beneficiaries
Spouses have the most flexibility when inheriting an IRA. Common options include:
- Rolling the IRA into their own IRA (or opening a new one in their name), which delays required minimum distributions (RMDs) until the spouse reaches their own RMD age. Early withdrawal penalties may still apply before age 59½.
- Maintaining the account as an inherited IRA and taking distributions based on life expectancy rather than the 10-year rule.
- Taking a lump-sum distribution, which may result in immediate taxation for traditional IRAs.
These options are generally available for both traditional and Roth IRAs, though tax treatment differs depending on the account type.
Non-Spousal Beneficiaries
Non-spousal beneficiaries are classified as either Eligible Designated Beneficiaries or Designated Beneficiaries. The distinction matters because it determines how—and how quickly—the inherited account must be distributed.
Designated Beneficiaries (10-Year Rule)
Most non-spouse beneficiaries fall into this category. Under the 10-year rule, the inherited account must be fully distributed by the end of the 10th year following the account owner’s death.
Additionally, if the original account owner had already reached their Required Beginning Date (RBD) for RMDs, the beneficiary is generally required to take annual RMDs during the 10-year period, in addition to fully depleting the account by year 10.
Eligible Designated Beneficiaries (Non-Spouse)
Eligible Designated Beneficiaries, who are not spouses, may have additional options, depending on whether the original account owner had reached their RBD.
If the owner had not reached their RBD, the beneficiary may choose to:
- Take distributions over their life expectancy
- Follow the 10-year rule
- Take a lump-sum distribution
If the owner had reached their RBD, the beneficiary may:
- Take distributions based on their life expectancy
- Take a lump-sum distribution
In most cases, beneficiaries must establish an Inherited IRA in their own name to receive distributions.
Special Considerations for Roth IRAs
Rules for inherited Roth IRAs are similar, but with important distinctions. While Roth distributions are generally income-tax-free, the 10-year rule may still apply. Eligible Designated Beneficiaries may also retain the option to stretch distributions over life expectancy, depending on their classification and circumstances.
The SECURE Act has significantly changed how beneficiaries must plan for inherited retirement accounts. Distribution rules can impact taxes, timing of income, and long-term financial planning decisions for heirs.
Because these rules are complex and highly dependent on individual circumstances, it’s important to evaluate retirement accounts within the context of a broader financial plan. Working with a financial planner can help ensure distribution strategies are handled thoughtfully, tax-efficiently, and in alignment with your goals for both yourself and your heirs.
Bibliography:
Charles Schwab. (2026). Inherited IRA withdrawal rules. https://www.schwab.com/ira/inherited-and-custodial-ira/inherited-ira-withdrawal-rules#fx_panel_204756
Vanguard. (2026). Inherited IRAS: RMD rules for IRA beneficiaries. https://investor.vanguard.com/investor-resources-education/retirement/rmd-rules-for-inherited-iras
OneAscent Financial Services, LLC (“OAFS”), d/b/a The Cornerstone Financial Group, is a registered investment adviser with the United States Securities and Exchange Commission. OAFS does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by OAFS or any unaffiliated third party. OAFS is neither an attorney nor accountant, and no portion of the presented content should be interpreted as legal, accounting, or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.