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What To Know About Inheriting Retirement Savings Accounts

The SECURE Act of 2019 and the SECURE 2.0 Act, passed in December 2022, dramatically changed the rules governing the inheritance of IRA and retirement plan assets. Retirement savings account owners and their loved ones should understand these complicated rules. Depending on a number of different factors, inheriting retirement plan assets could have a significant impact on a beneficiary’s tax obligation.

First, a bit about required minimum distributions

The rules governing retirement plans are designed to ensure that accounts don’t benefit from tax-deferred growth indefinitely. For that reason, account owners generally must begin taking required minimum distributions (RMDs) from traditional pre-tax accounts by April 1 of the year following the year they reach age 73 (see sidebar on Roth accounts).1 This is known as the required beginning date, or RBD.

Different rules apply to beneficiaries. The timing and amount of RMDs on inherited accounts depend on whether the beneficiary is:

  • a spouse who is the sole beneficiary

  • an eligible designated beneficiary (EDB)

  • an individual who is not an EDB

  • not an individual (e.g., an estate or charity)

The RMD rules also depend on whether the owner dies before, on, or after the RBD.

Spouse as sole beneficiary

Spouses who are sole beneficiaries have preferential treatment. If the account owner dies before the RBD, the spouse may wait until December 31 of the year in which the deceased would have had to begin RMDs to take a distribution. Alternatively, regardless of when the account owner died, a spouse can roll over account assets to their own retirement accounts or they may elect to treat a deceased account owner’s IRA or retirement plan as their own. By assuming ownership of the original account, the surviving spouse can make additional contributions (IRAs only), name new beneficiaries, and wait until their own RBD to start taking distributions.

Eligible designated beneficiaries

EDBs have certain advantages over other beneficiaries. EDBs are spouses and minor children of the account owner, beneficiaries who are not more than 10 years younger than the account owner (such as a close-in-age sibling), and those who meet the IRS’s definition of disabled or chronically ill.

If the account owner dies on or after the RBD: an EDB must calculate distributions using their life expectancy or the remaining life expectancy of the account owner, whichever period is longer.

If the owner dies before the RBD: the beneficiary would use their life expectancy to determine the RMDs.

In these cases, RMDs must begin no later than December 31 of the year after the original account owner’s death.

Note that if the original owner was of RMD age and failed to take the required amount in the year of death, the beneficiary must take the account owner’s distribution by December 31 of that year. In subsequent years, the beneficiary can use their life expectancy.

Other designated beneficiaries (individuals)

The original SECURE Act passed in 2019 ushered in a provision stating that, with regards to account owners who die after 2019, designated beneficiaries who are not EDBs are required to liquidate inherited accounts by December 31 of the year of the 10th anniversary of the account owner’s death. In early 2022, the IRS issued proposed regulations stipulating how the accounts should be liquidated based on when the account owner died. Following are those proposed rules:

If the account owner dies on or after the RBD: the beneficiary is generally required to take RMDs based on their life expectancy in years one through nine, and then liquidate the remaining assets in year 10. Beneficiaries may withdraw more than the required amount each year, but not less.

If the account owner dies before the RBD: the beneficiary is not required to take annual RMDs but must still liquidate the account by year 10. In this case, the beneficiary might want to spread the distributions over the 10 years in order to manage the annual tax liability. By contrast, the beneficiary of a Roth account — which generally provides tax-free distributions — might want to leave the assets intact for the full period, allowing the account to potentially benefit from tax-free growth for as long as possible (see sidebar on Roth accounts).

As of early 2024, the IRS had yet to issue final regulations; however, it has issued notices stating that certain beneficiaries who did not adhere to the annual RMD requirements under the 10-year rule for 2021, 2022, and 2023 won’t be subject to any penalties.

Regardless of where the final regulations land, this 10-year distribution period could result in unanticipated and potentially large tax bills.

Under IRS proposed regulations, an employer-sponsored retirement plan may be able to require EDBs use the 10-year rule or allow EDBs to elect the 10-year rule.

Beneficiaries may take a pass

A beneficiary may also disclaim an inherited retirement account. This may be appropriate if the initial beneficiary does not need the funds and/or want the tax liability. In this case, the assets may pass to a contingent beneficiary who has greater financial need or may be in a lower tax bracket or to the decedent’s estate. A qualified disclaimer statement must be completed within nine months of the date of the account owner’s death.

Other beneficiaries (non-individual)

For beneficiaries that are not individuals, such as a charity or the decendent’s estate, the rules depend on whether the account owner dies before or on or after the RBD. If the account owner dies before the RBD, the account will need to be liquidated by December 31 in the year of the 5th anniversary of the account owner’s death (no annual RMDs are required). If the account owner dies on or after the RBD, annual RMDs must be taken using the account owner’s remaining life expectancy.

If the beneficiary is a trust, the rules are even more complicated and generally beyond the scope of this article. Individuals should seek the assistance of an estate-planning attorney.

Prior to SECURE

How do the new rules compare to the previous regulations? Prior to passage of the original SECURE Act (i.e., before 2020), individuals who inherited retirement account assets were permitted to take distributions based on their own life expectancy, allowing them to “stretch” distributions and the resulting tax burden for potentially decades. After SECURE, designated beneficiaries who are not EDBs are required to distribute the entire account 10 years after the account owner’s death. Moreover, once a minor child reaches age 21 or after an EDB dies, the account must be distributed within 10 years.

Mistakes can be costly

Individuals should take special care to understand the rules regarding the inheritance of retirement plan assets. Failure to take the appropriate amount in any given year can result in a penalty equal to 25% of the amount that should have been withdrawn. (The penalty may be reduced to 10% if the error is corrected in a timely manner.)

Retirement account owners should review their beneficiary designations with their financial or tax professional and consider how the rules may affect inheritances and taxes. Any strategies that include trusts as beneficiaries should be considered especially carefully.

1This age rises to 75 for those who reach age 73 after 2032. Employees may be able to delay RMDs from a plan sponsored by their current employer if they work beyond their RMD age, unless they own more than 5% of the company.

About Roth accounts

Roth IRAs and Roth retirement plan accounts are not subject to RMDs while the account owner is alive; however, most beneficiaries who inherit these accounts are required to take RMDs.

In most cases, the distributions will be tax free, unless the Roth account is less than five years old. In this case, income taxes will apply only to the earnings portion of the distribution.

A surviving spouse who becomes the account owner of a Roth IRA is not required to take distributions.

What if a surviving spouse dies before RMDs begin?

If a surviving spouse dies prior to beginning RMDs, he or she will be treated as the account owner for the purpose of determining RMDs.


This material was prepared by Broadridge Investor Communication Solutions, Inc. This information is believed to be from reliable sources; however, no representation is made as to its accuracy or completeness. This information does not constitute tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty, nor is it a solicitation or recommendation to purchase or sell any insurance or investment product or service, and readers should not rely upon it as such. Readers should seek such advice from their own tax or legal counsel or financial professional. Securities, investment advisory and financial planning services through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484. Tel: 203-513-6000.



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