Q&A: Taxes and inherited IRAs

Dear Liz: Thanks for the recent column concerning children getting an inherited IRA, because I’m in that situation. Is the attorney for the estate required to include tax information with the distribution, or is it up to my accountant to sort things out? And since I don’t really need the money right now, would I have options as to how I receive the funds to avoid a tax hit?

Answer: You can’t avoid a tax hit with an inherited traditional IRA. The money has to come out and the withdrawals are taxable. For beneficiaries who aren’t the surviving spouse, the account typically must be drained within 10 years. (There are exceptions for beneficiaries who are minors, disabled or chronically ill.)

You have some flexibility about how rapidly you take the money out, however. If the account owner hadn’t started required minimum distributions before dying, you can withdraw money at any rate you want, provided you empty the account by Dec. 31 of the 10th year following the year of the owner’s death.

If the account owner had started required minimum distributions, you must take a minimum distribution each year. These are typically based on your own life expectancy. In addition to those annual withdrawals, you’ll need to take out the remaining money by the end of the 10th year following the year of death.

There was initially some confusion about whether beneficiaries had to take yearly required minimum distributions or could wait until the 10th year to withdraw the funds, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. Because of that confusion, the IRS has waived the penalties for failing to take required minimum distributions when the IRA owner died in 2020, 2021 or 2022. The waiver of penalties would not be available if the IRA owner died in 2023, Luscombe said.

Leaving money in the account as long as possible means the balance has longer to grow tax deferred. But you also could face a whopping tax bill in that 10th year. Definitely discuss your options with your tax pro. While the attorney for the estate may help with some details — such as arranging to get the money transferred from the deceased owner’s account — it will be up to you to set up your own inherited IRA and to arrange for distributions.


  1. Liz, the inherited IRA rules are confusing. I called the IRS this week to get the answer that I will go by. My father died in 2021 at age 89 and was taking RMDs. I am 68 and not on the RMD schedule. I was advised by IRS that I do not have to take RMDs and fall under the 10 year rule, taking all out by Dec 31, 2031. I did get her name and number!

    • Liz Weston says

      They are confusing. Advisors assumed annual RMDs wouldn’t be necessary, and then the IRS said they would. So please talk to a tax pro — someone who is paid to keep up with these nuances and who has professional insurance to cover the bill if they’re wrong.

  2. Carolyn Witt says

    I read with interest your article on inherited IRAs this morning. I am one of the people who fell into the initial confusion trap. My Mother died in 2020. My advisors and I concluded that I did not have to take RMDs, so I haven’t. My follow up question is, do I need to take a catch-up distribution or can I take distributions spread over the remaining years before the ten your requirement ends? Are there special filing requirements to correct this misunderstanding?

    • Liz Weston says

      Please talk to a tax pro. The initial understanding was that people could wait until the 10th year. Then the IRS came out with proposed regulations requiring yearly RMDs. The IRS has been waiving penalties for those who haven’t taken them but that might not continue.