top of page

Understanding Inherited IRAs: A Quick Guide to RMDs

James Tharin, CFA

Inheriting an Individual Retirement Account (IRA) presents both financial opportunities and responsibilities. Knowing the rules for Required Minimum Distributions (RMDs) is crucial to maximize your inheritance and avoid penalties. Let's explore the key points for both Eligible Designated Beneficiaries (EDBs) and Non-Eligible Designated Beneficiaries (Non-EDBs).


EDBs vs. non-EDBs

Eligible Designated Beneficiaries (EDBs) include surviving spouses, minor children of the account owner, disabled individuals, chronically ill individuals, and beneficiaries not more than 10 years younger than the account owner. EDBs enjoy more flexible distribution rules, often allowing distributions over their lifetime. Non-Eligible Designated Beneficiaries (Non-EDBs) inherit an IRA but do not qualify as EDBs. The key rule for non-EDBs is the 10-year rule: the entire balance of the inherited IRA must be distributed within 10 years of the original owner's death and there might be an annual distribution requirement. The full balance can be withdrawn at any time within the 10-year period.


RMDs for non-EDBs

If the original owner died before their Required Beginning Date (RBD), no RMDs are required in the year of death or any year before the 10-year deadline.



If the original owner died on or after their RBD, RMDs must be taken in the year of death and each year after based on IRS life expectancy tables. However, the 10-year rule applies so the account must be depleted within the 10-year period.


Entities (Trusts or Charities)

Beneficiaries that are entities (like trusts or charities) generally follow the 10-year rule, but specifics can vary.


Conclusion

Understanding the rules for inherited IRAs empowers you to make informed decisions. Remember that while the new regulations are finalized, they will not take effect until 2025. If you have any questions or need further clarification, consult a financial advisor.

398 views

Commentaires


© 2025 EMERALD ASSET MANAGEMENT, INC.

  • Facebook Clean
  • LinkedIn Clean

Emerald Asset Management, Inc. is a Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where Emerald Asset Management, Inc. and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Emerald Asset Management, Inc. unless a client service agreement is in place.

bottom of page