IRA Inheritance Planning FAQs

Your IRA does not pass through your will or trust. It goes directly to whoever you have named on the beneficiary designation form, regardless of what your other estate planning documents say.

That single form controls one of the most valuable assets many people own. Naming the right beneficiary, and keeping that designation current, is one of the most consequential decisions in your entire estate plan.

The original SECURE Act, passed in 2019, eliminated the stretch IRA for most non-spouse beneficiaries. Before that law, a child or grandchild who inherited your IRA could take small distributions over their entire lifetime, allowing the account to grow tax-deferred for decades.

That option is now largely gone. Most non-spouse beneficiaries who inherit an IRA after 2019 must empty the account within ten years of the owner’s death.

Beginning in 2025, IRS final regulations confirmed that annual required minimum distributions apply during that ten-year window when the original owner had already started taking distributions.

The tax implications of this compressed timeline are significant and deserve careful planning on your end.

A narrow category of beneficiaries called eligible designated beneficiaries can still stretch distributions over their lifetime rather than emptying the account in ten years.

This group includes a surviving spouse, minor children until they reach age 21, individuals who are disabled or chronically ill, and any beneficiary who is not more than ten years younger than you.

Adult children, grandchildren, and most other family members do not qualify and are subject to the ten-year rule.

Your surviving spouse has more flexibility than any other beneficiary. They can treat your IRA as their own, rolling it into an existing account and deferring distributions based on their own age and required beginning date.

Alternatively, they can keep it as an inherited IRA and take distributions based on their life expectancy. This flexibility makes spousal planning considerably more straightforward than planning for other beneficiaries, though the right choice still depends on the spouse’s age, income, and tax situation at the time of inheritance.

This requires careful thought. Trusts are often named as IRA beneficiaries when the account owner wants to control how distributions are used, protect a beneficiary with special needs, or prevent a young or financially inexperienced heir from accessing a large sum at once.

The problem is that trusts do not qualify for the same treatment as individual beneficiaries unless they meet specific IRS requirements to be treated as see-through trusts.

Even then, most trust beneficiaries will still be subject to the ten-year rule, which can accelerate taxable distributions in ways that were not anticipated when the trust was originally drafted.

Many trusts written before 2020 were designed around the old stretch rules and may produce unintended results today. If you have a trust named as your IRA beneficiary, it deserves a review.

Yes, and it is meaningful. Distributions from a traditional inherited IRA are taxed as ordinary income to the beneficiary.

Under the ten-year rule, a beneficiary who receives a large traditional IRA may face a significant tax burden if they take distributions in years when their income is already high.

A Roth IRA, by contrast, passes income-tax-free to beneficiaries, provided the account has been open for at least five years.

The ten-year rule still applies to Roth IRAs inherited by non-spouse beneficiaries, but withdrawals carry no income tax.

For this reason, converting a traditional IRA to a Roth during your lifetime, and paying the tax now rather than passing the burden to your heirs, is a strategy worth exploring depending on your current tax situation.

Any significant life event warrants a review: marriage, divorce, the birth of a child or grandchild, the death of a named beneficiary, or a major change in a beneficiary’s financial or personal circumstances.

Beyond life events, the IRA rules themselves have changed dramatically in recent years. A beneficiary designation that made perfect sense before 2020 may no longer align with your intentions or produce the result you expect.

Reviewing your designations every few years, and coordinating them with your estate planning attorney, keeps your plan working as intended.