Inheriting an IRA From a Parent: Complete Rules Guide
Your parent left you their IRA. Here's exactly what you need to know about the 10-year rule, RMDs, and your options.
Key Takeaways
- 1The SECURE Act requires most non-spouse beneficiaries to empty inherited IRAs within 10 years.
- 2Annual RMDs may be required during the 10-year period depending on circumstances.
- 3You cannot roll an inherited IRA into your own IRA - it must stay separate.
- 4Distributions from inherited traditional IRAs are taxable as ordinary income.
- 5Strategic distribution planning can minimize your tax burden over the 10-year period.
Understanding Inherited IRAs From Parents
When you inherit an IRA from a parent, you become the beneficiary of a special type of account with its own rules. The account cannot simply become "yours" - it remains an inherited IRA with specific requirements.
- **Separate account:** Must be titled as inherited IRA with your name as beneficiary
- **No contributions:** You cannot add money to an inherited IRA
- **Distribution deadline:** Must be emptied within 10 years (SECURE Act)
- **Tax treatment:** Distributions taxed as ordinary income (traditional IRA)
- **Investment control:** You can change investments within the inherited IRA
The 10-Year Rule Explained
The SECURE Act of 2019 changed inherited IRA rules dramatically. Most non-spouse beneficiaries must now empty inherited IRAs within 10 years of the original owner's death.
- **Clock starts:** December 31 of year following parent's death
- **Flexibility within 10 years:** Take any amount, any time
- **Zero in year 1-9 okay:** But must empty by year 10 (tax bomb risk)
- **Plan strategically:** Spreading distributions minimizes taxes
| Beneficiary Type | Distribution Requirement | Notes |
|---|---|---|
| Non-spouse (adult child) | 10-year rule | Must empty by end of 10th year |
| Spouse | Can treat as own IRA | Can use own life expectancy |
| Disabled/chronically ill | Life expectancy | Exception to 10-year rule |
| Minor child | Life expectancy until 21, then 10-year | Switches to 10-year at majority |
| Less than 10 years younger | Life expectancy | Rare exception |
The Year 10 Tax Bomb
If you wait until year 10 to take all distributions, you could face a massive tax bill. A $500k inherited IRA taken in one year could push you into the 32% or 37% bracket.
RMD Requirements During the 10-Year Period
Recent IRS guidance clarified that annual RMDs may be required during the 10-year period, depending on whether your parent had already started taking RMDs.
- **If parent was 73+:** You must take RMDs based on your life expectancy annually
- **If parent was younger:** No annual requirement, but still must empty by year 10
- **Penalty for missing RMD:** 25% of the amount you should have taken
- **Use IRS Single Life Table:** For calculating annual RMD amounts
| Parent's Status at Death | Your RMD Requirement |
|---|---|
| Before RMD age (73 in 2024) | No annual RMDs required; just empty by year 10 |
| After RMD age or taking RMDs | Annual RMDs required each year 1-9; empty by year 10 |
Exploring your retirement options?
Our 60-second quiz matches you with the right account type
Your Options With an Inherited IRA
You have several choices for handling an inherited IRA from a parent:
- **Keep as inherited IRA:** Maintain account, take distributions over 10 years
- **Transfer to new custodian:** Move to preferred brokerage as inherited IRA
- **Convert to Roth (partially):** Pay taxes now, future growth is tax-free
- **Change investments:** Reallocate within the inherited IRA
- **Disclaim (if needed):** Pass to contingent beneficiary
Cannot Roll to Your Own IRA
Unlike spouses, adult children cannot roll an inherited IRA into their own IRA. The account must remain titled as an inherited IRA for its entire existence.
Tax Strategies for Inherited IRAs
Smart distribution planning can save thousands in taxes over the 10-year period:
- **Spread distributions evenly:** Prevents bracket creep in any single year
- **Take more in low-income years:** Job loss, sabbatical, early retirement
- **Roth conversion consideration:** Convert portions when in lower brackets
- **Bunch deductions:** Coordinate with charitable giving or other deductions
- **State tax planning:** Consider moving to lower-tax state if substantial
| Strategy | Example | Tax Savings |
|---|---|---|
| Year 10 lump sum | $500k in 2034 | Highest tax bill - up to $150k+ |
| Equal 10-year spread | $50k per year | Moderate - stays in 22-24% bracket |
| Front-load low years | More in years 1-3 | Best if income rises later |
Don't Miss Required RMDs
If your parent was already taking RMDs, you must take annual distributions based on your life expectancy. Missing an RMD results in a 25% penalty on the amount you should have withdrawn.
Roll Inherited IRA Distributions to Gold IRA
While you cannot roll an inherited IRA directly to a Gold IRA, you can use distributions strategically. After taking a distribution (and paying applicable taxes), you can contribute to your own IRA including a Gold IRA.
- Take inherited IRA distributions as required
- Use after-tax proceeds to fund your own Gold IRA
- Gold provides inflation protection your paper IRA lacks
- Diversify your overall retirement holdings
- Physical gold protects against market volatility
Frequently Asked Questions
1Can I roll my inherited IRA into my own IRA?
No. As a non-spouse beneficiary (adult child), you cannot roll an inherited IRA into your own IRA. The account must remain titled as an inherited IRA. Only surviving spouses have the option to treat an inherited IRA as their own.
2What happens if I miss the 10-year deadline?
The IRS will impose a 25% penalty on the amount that should have been distributed. In extreme cases, the entire remaining balance could be considered an excess accumulation. Don't let the deadline sneak up on you.
3Is an inherited Roth IRA also subject to the 10-year rule?
Yes, inherited Roth IRAs must also be emptied within 10 years for most non-spouse beneficiaries. However, the distributions are tax-free since Roth contributions were made with after-tax dollars. No annual RMDs are required during the 10-year period.
Related Articles
Helpful Guides
Interactive Tools
Ready to Protect Your Retirement?
Join thousands of Americans who have secured their savings with physical gold. Augusta Precious Metals makes the process simple.