Inherited IRAs: What You Need to Know About the New IRS Rules in 2025

If you’ve inherited an Individual Retirement Account (IRA), 2025 brings new IRS rules that could significantly impact your tax situation. At RBA Tax & Financial Services, we want you to be prepared and empowered. These updates include strict enforcement of the 10-year rule and potential penalties of up to 25% for missing required minimum distributions (RMDs).

Let’s break it down so you can avoid penalties and make smart moves for your financial future.

🔍 Background: The SECURE Acts Changed the Game

Before the SECURE Act of 2019 and SECURE 2.0 of 2022, non-spouse beneficiaries could stretch IRA withdrawals over their lifetime — a major tax-saving advantage.

But the game has changed:

SECURE Act of 2019 increased the RMD age to 72 and introduced a 10-year rule for inherited IRAs.
SECURE 2.0 (2022) further raised the RMD age to:
- 73 for those turning 72 after 2022
- 75 for those born in 1960 or later
It also reduced penalties for missed RMDs to 25%, and to 10% if corrected quickly.

📅 What Is the 10-Year Rule?

If you inherit an IRA, you now have 10 years from the original account holder’s death to fully deplete the account. This rule applies whether or not the original owner began taking RMDs.

Penalties:

Missed RMDs come with a 25% excise tax, but if corrected by the end of the second year, the IRS will reduce it to 10%.

💍 Surviving Spouses: You Have Options

If you’re a surviving spouse, you can choose how to treat the IRA:

✅ Assume the IRA as Your Own

You can delay RMDs until your spouse would’ve reached RMD age. For example, if they passed at 55 in 2024, you can wait until April 1, 2045.

✅ Elect to Be Treated as a Beneficiary

You’ll avoid the 10% early withdrawal penalty before age 59½. This is ideal if you need earlier access to the funds.

Bonus for Roth IRAs: If you inherit a Roth IRA and assume ownership, you’re not required to take RMDs, allowing the account to grow tax-free for life.

👶 Special Rules for Minor Children & Disabled Beneficiaries

Minor children: The 10-year clock starts at age 21 — not at the time of inheritance.
Disabled or chronically ill beneficiaries: May be exempt from the 10-year rule altogether.

💡 Smart Planning Strategies

Don’t wait until Year 10 to take action. Spreading withdrawals evenly over the 10-year period can help minimize your tax bracket impact.

Example: Inheriting a $100,000 IRA and staying within the 24% tax bracket instead of the 32% could save you over $8,000 in taxes.

You can also:

Delay withdrawals if you expect your income to drop in future years.
Accelerate withdrawals if you think taxes will increase.

📌 Key Takeaways from RBA Tax

✅ The 10-year rule is active, and penalties are no joke.
✅ Surviving spouses have unique choices—choose wisely.
✅ Parents of minors—track the 10-year clock starting at age 21.
✅ Everyone else—use tax strategies to time your withdrawals.

At RBA Tax & Financial Services, our expert team helps individuals and families make sense of complex tax laws like these. Whether you’ve inherited an IRA or are planning your estate, we’re here to guide you every step of the way.

👉 Need help planning your inherited IRA strategy?
Book a consultation with us today: www.rbafinancial.services

Let’s make the most of your legacy — the smart, tax-efficient way.