RMD rules for inherited IRAs

When you inherit an IRA, many of the IRS rules for required minimum distributions (RMDs) still apply. However, there may be additional rules based on your relationship to the deceased original owner.

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What to know about inherited IRAs

If you inherited an IRA such as a traditional, rollover IRA, SEP IRA, SIMPLE IRA, then the rules around RMDs fall into 3 categories: spouses, non-spouses, and entities (such as trusts, estates, or charities). If you don't take the RMDs from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.

If you inherited a Roth IRA then the same rules generally apply—you must take RMDs. However, as long as the assets have been in the original Roth IRA owner's account for 5 years or more, you can make tax-free withdrawals.

If you inherited an IRA from your spouse, you have the choice of either moving the money into your own IRA or into an inherited IRA. The RMD rules are different for each choice, so consider your options carefully.

Option 1: Move the money into your own IRA

If you consolidate the money into your IRA, then the regular RMD rules apply.

Choosing this option can be advantageous if:

  • You have not yet reached age 72 but your spouse had. It enables you to stretch out the tax-deferral of IRA assets by delaying distributions until you reach age 72.

Conversely, rolling the assets to your own IRA may not be advantageous if:

  • You are under age 59½, and you intend to take a distribution from your IRA. You will be subject to the 10% early withdrawal penalty in your IRA but would not be subject to this penalty from an inherited IRA.

Option 2: Move the money into an inherited IRA

If you move your money into an inherited IRA, you withdraw RMDs based on your age. RMD amounts are based on your age and are recalculated each year based on factors in the IRS Single Life Expectancy Table. Additionally, there is no 10% withdrawal penalty, so it's also something to consider if you need immediate access to cash.

If you move your money into an inherited IRA or Roth IRA, your distribution requirements will be based on certain factors, including the date of the original account owner's death.

If the account owner died on or before December 31, 2019 you have the ability to take RMDs based on your age using the IRS Single Life Expectancy Table.

If the original account owner died on or after January 1, 2020, in most cases you will need to fully distribute your account within 10 years following the death of the original owner.  However, there are exceptions if you are considered an eligible designated beneficiary. Eligible designated beneficiaries include a minor child of the original account owner, a disabled or chronically ill individual, or any other person who is not more than 10 years younger than the deceased account holder. If you are an eligible designated beneficiary, you can still withdraw RMDs based on your age.

If the beneficiary is an entity, charity, or nonqualifying trust, and the owner was still living by April 1 of the year in which the account holder reached age 72, the distributions would be based on the remaining Single Life Expectancy of the IRA owner. If the owner was younger than 72, the assets must be completely distributed by December 31 of the 5th year containing the anniversary of the IRA owner's death.

Consult your tax advisor to determine if an exemption may apply to the trust.

How Fidelity can help you plan

If you are have an inherited IRA, we can help you:



Call us at 800-343-3548 anytime—we are always happy to help.

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