With the passage of the SECURE Act 2.0, the rules governing Inherited IRAs have undergone significant changes that can impact how beneficiaries manage these accounts. Whether you’ve recently inherited an IRA or are planning for the future, understanding these rules is crucial. Here’s what you need to know:

Types of Beneficiaries and Their Distribution Rules

      1. Eligible Designated Beneficiaries (EDBs):

Eligible Designated Beneficiaries include:

  • Spouse: As a spouse, you have the option to treat the IRA as your own, meaning you can continue contributing to it and take distributions based on your life expectancy. Alternatively, you can roll it into your own IRA or take distributions beginning when your spouse would have reached their Required Beginning Date (RBD).
  • Minor Child: If you are a minor child of the deceased account holder, you can take distributions based on your life expectancy until you reach the age of majority. After that, you must deplete the account within 10 years.
  • Disabled or Chronically Ill Individuals: These beneficiaries can take distributions based on their own life expectancy.
  • Beneficiaries Less Than 10 Years Younger Than the Decedent: If you are not more than 10 years younger than the deceased, you can take distributions over your life expectancy.
  1. Non-Eligible Designated Beneficiaries (NEDBs): 

Non-Eligible Designated Beneficiaries include all beneficiaries designated by the deceased that do not fit into an Eligible Beneficiary category above, and must follow the 10-year rule. This means you must deplete the entire IRA balance within 10 years of the original      account owner’s death.

  • If the decedent had not reached RBD prior to death, there are no Required Minimum Distributions, but the account must be fully distributed in 10 years of the date of death.
  • If the decedent reached RBD before death, then the beneficiary must follow the RMD schedule of the deceased, but also have it pay out fully in 10 years.
  • The IRS waived penalties for missed or incorrect RMDs for 2020 in response to the COVID-19 pandemic. The agency also waived RMD penalties for inherited accounts in 2021, 2022, 2023 and 2024 due to widespread confusion over the new rules governing RMDs for non-eligible designated beneficiaries subject to RMDs during their 10-year distribution period.
  1. Non-Designated Beneficiaries: 

These include entities like estates, trusts, and charities. The rules vary depending on whether the original owner died before or after their required beginning date (RBD) for RMDs:

  • Before RBD: The 5-year rule applies, requiring the entire account to be depleted within five years.
  • On or After RBD: Distributions can be taken over the remaining life expectancy of the deceased account owner.

Key Considerations for Inherited IRA’s 

  • Tax Implications: Distributions from Inherited IRAs are generally taxable as ordinary income. Consider the tax implications of large distributions, which could push you into a higher tax bracket.
  • Planning for Distributions: Carefully plan the timing and amount of your distributions to manage your tax liability effectively. Spouses should consider the benefits of rolling over the IRA into their own.
  • Roth IRA’s: These follow the same rules as Traditional IRA’s regarding the distribution rules for all beneficiaries.
  • Beneficiary Designations: Regularly update beneficiary designations to ensure they align with your current wishes and to avoid unintended consequences.
  • Consult a Professional: Given the complexities and potential tax consequences, it’s advisable to consult with a CPA or financial advisor to develop a strategy that aligns with your financial goals.


The changes brought about by the SECURE Act 2.0 have introduced new considerations for beneficiaries of IRAs. Understanding your status as a beneficiary and the associated rules is essential for effective financial planning. If you have any questions or need personalized advice, please do not hesitate to contact our office. We at theKFORDgroup are here to help you navigate these changes and make informed decisions about your inherited IRA.

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