RMD Rules for Inherited IRAs

If you've inherited an IRA, learn about the required minimum distributions (RMDs) you may need to take soon, as well as how RMDs work in the long run.

Which rules governing RMDs apply to you depend on your relationship to the deceased original owner. The relationships fall into three categories:

  • Spouse inheritors
  • Non-spouse inheritors, such as son, daughter, brother, sister, or friend of the original owner
  • Entity inheritors, such as a trust, estate, or non-profit organization

Review the guidelines below "For All," and then review the tab that applies to you specifically.

When to begin taking RMDs

RMD rules dictate not only how much, at a minimum, you are required to withdraw from an IRA, but when you must begin taking those distributions, as well. Generally, you must begin taking RMDs for Inherited IRA assets by December 31 of the year after the year of the original owner's death. Our Retirement Distribution Center can help you calculate and manage your required withdrawals.

Penalty for missing RMDs

If you don't take the required minimum distributions from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.

Inheriting a Roth IRA

If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take RMDs. As long as the assets have been in the Roth IRA for five or more years, these RMDs can be withdrawn federally tax-free.

The five-year rule

If the original account owner died prior to age 70½, you may choose to elect to use the five-year rule. Generally, this rule applies if the original owner died before April 1 of the year following the year the original owner would have turned age 70½. If you take advantage of this rule, you do not have to begin taking RMDs in the year following the year of the original owner's death.

Under the five-year rule:

  • You can withdraw from your inherited IRA assets at any time, in any amount.
  • You must withdraw all assets by December 31 of the fifth anniversary year following the IRA owner's death.

As long as the account is depleted within this timeframe, the RMD penalties can generally be avoided.

Example:
Year of death: 2011
Fifth year after the year of death: 2016
Deadline for depleting the account: December 31, 2016

However, under the five-year rule, assets you withdraw will be included in your ordinary income and are taxable as such. This may impact your taxes significantly. Talk to a tax advisor if you plan to use this option.

Please note that the information provided by Fidelity Investments is general in nature and should not be considered investment, legal or tax advice. Fidelity does not provide investment, legal, or tax advice. Consult with a legal or tax professional regarding your unique tax situations.

When you inherit an IRA from your spouse, you have a choice to make that other inheritors don't: you can roll over the assets into your own IRA. You can also transfer the assets into an Inherited IRA, as all other beneficiaries can. Depending on which option you choose, different RMD rules apply.

Option 1: Roll the inherited assets into your own IRA

If you choose to roll over the assets into your own IRA, you would base the timing and calculation on your own age using the IRS Uniform Life Expectancy Table (PDF).

The table assumes that distributions would extend over two lives: yours and a beneficiary 10 years younger than you. With this option, your RMD would be lower than if you transferred your assets to an Inherited IRA.

Choosing this option can be advantageous if:

  • You have not yet reached age 70½ but your spouse had. It enables you to stretch out the tax-deferral of IRA assets by delaying distributions until you reach age 70½.
  • You are over age 59½ and you may want to take distributions. Distributions from your IRA would not be subject to the 10% early withdrawal penalty.

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 on an Inherited IRA.

Option 2: Transfer the assets to an Inherited IRA

If you choose to transfer the assets to an Inherited IRA, the amount of your RMDs will be based on your age and be recalculated each year based on the factors in the IRS Single Life Expectancy Table. A benefit of this option is that distributions from an Inherited IRA, no matter what your age, are not subject to the 10% early withdrawal penalty.

The timing of the initial distribution may be based on your spouse's age at the time of his/her death. If your spouse was:

  • Older than age 70½, you must begin taking RMDs by December 31 of the year following your spouse's death.
    View an example
  • Younger than 70½, you may be able to delay RMDs until your spouse would have turned 70½.
    View an example

Transferring your assets to an Inherited IRA may be advantageous if you are:

  • Older than your spouse and your spouse died before age 70½, since this option would allow you to delay taking the RMDs until the year your spouse would have turned age 70½.
  • Younger than age 59½ and you need access to these assets immediately, since you would not be subject to a 10% early withdrawal penalty.

If you'd like to convert to Roth IRA

Whether you move the inherited assets to your existing IRA or open a new IRA, you have the option of converting to a Roth IRA. Be aware, however, that when converting to Roth, you will have to pay any taxes due at the time you convert.

Consult an inheritor services specialist at 800-544-0003 for more information if you are interested in converting an Inherited IRA to a Roth IRA.

If you wish to make immediate withdrawals

When you move the inherited assets to your own account may make a difference if you need immediate cash.

If you need some of the assets right away and you are under age 59½, you may want to put some or all of the assets into an Inherited IRA immediately. Since distributions from that account will not have a 10% early withdrawal penalty that would apply to your own IRA, this option may be a good one if you need that immediate access to cash.

However, if you do not need those assets immediately or you are over age 59½, putting those assets into your own IRA might make the most sense. Since you are over age 59½, there will not be early withdrawal penalties.

Generally, the IRS requires non-spouse beneficiaries to begin taking RMDs from the inherited assets beginning in the year after the year of death of the original owner. The first RMD must be taken from the newly established Inherited IRA by December 31 of that next year. So if the original owner died in 2016, then the first RMD must be taken by December 31, 2017.

As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year RMD. For each year after, you would subtract one year from the initial life expectancy factor.

View an example of a surviving child establishing an Inherited IRA by the December 31 deadline

When there are multiple beneficiaries

When IRA assets are inherited by several individuals, each beneficiary should set up their own Inherited IRA by December 31 of the year following the year of death.

Any beneficiaries who do not separate their inherited IRA assets by that date will generally need to base their RMDs on the age of the oldest remaining beneficiary on the account as of December 31.

View an example of a surviving child not separating in a timely manner

Inheriting a Roth IRA

If you inherit a Roth IRA and roll over to an Inherited Roth IRA, you must take RMDs (unlike the original owner, who was exempt from RMDs during their lifetime). The assets must be moved to an inherited IRA and the same rules apply for separating the assets as when there are multiple beneficiaries.

You must begin taking RMDs in the year after the year of death, using your age and the IRS Single Life Expectancy Table for RMD calculations. As long as the assets have been in the Roth IRA for five or more years, these RMDs can be taken tax-free.

View an example of a surviving child establishing an Inherited Roth IRA in a timely manner

If the beneficiary is an entity, charity, or non-qualifying trust, and the owner was still living by April 1 of the year following reaching age 70½, the distributions would be based on the remaining Single Life Expectancy of the IRA owner. If the owner was younger than 70½, the assets must be completely distributed by December 31 of the fifth year following the year of the IRA owner's death.

An exception is a "look-through" trust. If certain requirements are met, including that the trust is structured in such a way that the beneficiary is identifiable, the beneficiary may be able to take RMDs based on the date of birth of the oldest beneficiary of the trust. Consult your tax advisor to determine if a trust that names you as the beneficiary may be eligible for this RMD treatment.

Next steps

Set up automatic withdrawals

Simplify your RMDs by letting Fidelity help ensure you meet IRS requirements and deadlines.

Retirement Distribution Center

See how our Retirement Distribution Center can help you calculate and manage your RMDs for your Fidelity IRAs.

Open an Inherited IRA

Open an account with Fidelity to claim your inherited assets and continue the account's tax-deferred growth.