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For several years, many inherited IRA beneficiaries have lived in a state of uncertainty. Following the passage of the SECURE Act in 2019 and its successor, SECURE 2.0, enacted in December 2022, the rules governing inherited retirement accounts changed significantly. Yet IRS enforcement lagged, and required distributions were effectively delayed for many heirs.

That grace period is now ending.

Beginning this year, the IRS is enforcing annual required minimum distributions (RMDs) for certain inherited IRAs, and beneficiaries who fail to comply may face substantial penalties. If you inherited an IRA in recent years, or if your estate plan includes retirement accounts, now is the time to understand how these rules apply to you.

A Brief Recap: What Changed Under the SECURE Act

Before the SECURE Act, most non-spouse beneficiaries could “stretch” IRA distributions over their lifetime, allowing assets to grow tax-deferred for decades. The SECURE Act eliminated this option for most heirs, and SECURE 2.0 refined and clarified the new framework.

Today, many beneficiaries fall under the 10-year rule, which requires the entire inherited IRA to be fully distributed by the end of the 10th year following the original account owner’s death.

However, confusion arose about whether beneficiaries were also required to take annual distributions during those 10 years, especially when the original IRA owner had already begun taking RMDs before death.

IRS Enforcement Has Arrived

After multiple years of proposed regulations, delays, and penalty waivers, the IRS is now enforcing its interpretation:

• If the original IRA owner had already started taking RMDs before death, certain beneficiaries subject to the 10-year rule must take annual RMDs during the 10-year period.
• Failing to take these annual distributions may trigger penalties, even if the account is fully withdrawn by the end of year 10.

While penalty relief was granted for missed distributions in prior years (covering tax years 2020 through 2024), that relief has ended. Going forward, beneficiaries are expected to comply.

Who Is Most Affected?

These rules primarily impact:

• Adult children who inherit IRAs from parents
• Non-spouse beneficiaries who are more than 10 years younger than the original account holder
• Trusts named as IRA beneficiaries
• High-income beneficiaries who may already be in higher tax brackets

Certain “eligible designated beneficiaries,” such as surviving spouses, minor children (until adulthood), disabled individuals, and chronically ill individuals, may still qualify for different distribution rules. However, even these exceptions require careful planning.

Why This Matters for Estate Planning

Inherited IRAs are often one of the largest assets passed to heirs, and poor planning can result in accelerated income taxes, exposure to higher marginal tax brackets, lost opportunities for tax deferral, and unexpected penalties for missed distributions.

For many families, retirement accounts are still named directly to individuals or trusts that were created before the SECURE Act existed. In those cases, beneficiary designations and trust provisions may no longer align with current law.

Planning Opportunities Still Exist

Although the stretch IRA is largely gone, proactive planning can still make a meaningful difference. Strategies worth considering include reviewing and updating beneficiary designations, evaluating whether trusts are properly structured for inherited IRAs, coordinating IRA distributions with overall income tax planning, considering Roth conversions during the original owner’s lifetime, and aligning retirement assets with broader estate and incapacity planning goals. The key is coordination. Retirement accounts do not operate in a vacuum, and decisions made today can have tax consequences for your family for years to come.

Final Thoughts

The enforcement of inherited IRA distribution rules is a reminder that estate planning is not a “set it and forget it” process. Tax laws evolve, and plans must evolve with them.

If you have inherited an IRA or if your estate plan includes retirement accounts, it is essential to review your plan now to ensure compliance and avoid unnecessary tax exposure.

Thanks for reading.
Christopher E. Botti, Esq.
Certified Specialist in Estate Planning, Trust and Probate Law
&
Chris Michail, Associate Attorney
Co-Author

This blog is for informational purposes only and does not constitute legal advice. Every situation is unique, and you should consult with a qualified attorney for advice regarding your specific circumstances.