As of July 22, 2025, the rules for inherited IRAs—specifically those inherited from someone who died before January 1, 2020—remain mostly unchanged, but recent IRS clarifications and final regulations have provided important details that every beneficiary should know. This update explains what has changed, who is affected, when the rules apply, what actions are required, and what these changes mean for anyone with a pre-2020 inherited IRA, including traditional IRA accounts. It also covers the Five-year deferral rule and how it fits into the current landscape.
Summary of What Changed
The main rules for inherited IRAs from deaths before 2020 have not changed, but the IRS has issued new guidance and final regulations that confirm and clarify how these accounts should be handled. The most important update is that the old rules—often called the “stretch IRA” rules—still apply to these accounts. This means that non-spouse beneficiaries can continue to take required minimum distributions (RMDs) based on their own life expectancy, rather than being forced to empty the account within 10 years as required for most post-2020 inherited IRAs. The IRS has also clarified when the Five-year deferral rule can be used and confirmed that it is not available if the original IRA owner had already started taking RMDs before their death.
Who Is Affected
These rules affect anyone who inherited a traditional IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), 457(b), profit-sharing plan, or other defined contribution plan from someone who died before January 1, 2020. The main groups include:
- Non-spouse beneficiaries (such as children, grandchildren, or other relatives)
- Spousal beneficiaries (surviving spouses)
- Trusts and estates named as beneficiaries
- Financial advisors, tax professionals, and estate planners working with these accounts
If you inherited an IRA after January 1, 2020, different rules apply, and you may be subject to the 10-year distribution rule introduced by the SECURE Act.
Effective Dates
The rules described here apply to inherited IRAs from decedents who died before January 1, 2020. The IRS’s latest clarifications and final regulations, issued through 2024 and early 2025, confirm that these accounts are “grandfathered” under the old rules. There are no new deadlines or retroactive changes for these accounts, but beneficiaries must continue to follow the required minimum distribution schedule set by the IRS.
Required Actions for Beneficiaries
If you are a beneficiary of a pre-2020 inherited IRA, here’s what you need to do:
- Confirm the Date of Death
Make sure the original IRA owner died before January 1, 2020. This determines if you can use the old rules. -
Determine Your Beneficiary Status
The IRS looks at who is a beneficiary as of September 30 of the year after the IRA owner’s death. Only those who are still beneficiaries on that date count for RMD calculations. -
Choose a Withdrawal Method
You have three main options:- Life Expectancy Method: Take annual RMDs based on your age and the IRS Single Life Table. This is the “stretch IRA” approach.
- Lump-Sum Distribution: Withdraw the entire account at once. This is allowed at any time.
- Five-year Deferral Rule: Only available if the IRA owner died before their required beginning date (RBD). You must withdraw the entire account by December 31 of the fifth year after the owner’s death, but you don’t have to take any distributions before then.
- Start RMDs on Time
If you use the life expectancy method, you must begin withdrawals by December 31 of the year after the IRA owner’s death. Missing this deadline can result in a 50% penalty on the amount you should have withdrawn. -
Spousal Beneficiaries: Decide How to Treat the IRA
If you are the surviving spouse and the only beneficiary, you can choose to treat the inherited IRA as your own. This means you can make new contributions, roll over other retirement funds, and use your own RMD schedule. If you do not treat it as your own, you must follow the beneficiary rules. -
Report Distributions on Your Taxes
All withdrawals from a traditional IRA are generally taxable income. You must report them on your tax return each year.
Implications for Pending Applications and Existing Accounts
If you are in the process of claiming an inherited IRA or have not yet started taking distributions, it is important to act quickly:
- Check the account’s status: Make sure the account is properly titled as an inherited IRA. The account should be in the name of the deceased owner for the benefit of the beneficiary.
- Review beneficiary designations: If you are an estate planner or financial advisor, confirm that the right people are listed as beneficiaries and that they meet the IRS’s definition of a designated beneficiary.
- Meet all deadlines: If you miss the RMD deadline, you may face a large penalty. The IRS may waive the penalty if you can show reasonable cause, but this is not guaranteed.
- Trusts and estates: If a trust or estate is the beneficiary, special rules apply. Usually, these accounts must be distributed within five years or immediately, unless the trust qualifies as a “see-through” trust.
Detailed Explanation of the Key Rules
1. Life Expectancy Method (Stretch IRA)
This is the most popular option for non-spouse beneficiaries of pre-2020 inherited IRAs. You use the IRS Single Life Table (found in IRS Publication 590-B) to find your life expectancy based on your age in the year after the IRA owner’s death. Each year, you subtract one from the divisor. For example, if your life expectancy is 30 years, you divide the account balance by 30 for the first year, by 29 for the second year, and so on. This spreads out the tax burden and allows the account to keep growing tax-deferred.
2. Lump-Sum Distribution
You can withdraw the entire account at any time. This may be necessary if you need the money right away, but it can result in a large tax bill because the full amount is added to your income for that year.
3. Five-year Deferral Rule
This rule allows you to wait up to five years before withdrawing the entire account, but only if the IRA owner died before their required beginning date (RBD). The RBD is usually April 1 of the year after the owner turned 73 (or 70½ for deaths before 2020). If the owner had already started taking RMDs, you cannot use this rule. No withdrawals are required during the five-year period, but the entire balance must be distributed by December 31 of the fifth year after death.
4. Spousal Beneficiary Options
If you are the surviving spouse, you have more choices than other beneficiaries:
– Treat the IRA as your own: You can roll the inherited IRA into your own IRA, make new contributions, and use your own RMD schedule.
– Remain a beneficiary: You can keep the account as an inherited IRA and use the life expectancy method for RMDs.
– Delay RMDs: If your spouse died before their RBD, you can delay RMDs until the year your spouse would have turned 73.
Recent IRS Clarifications and Final Regulations
The IRS issued final regulations in late 2024 that confirm pre-2020 inherited IRAs are not subject to the 10-year rule created by the SECURE Act. This means you do not have to empty the account within 10 years, as is now required for most inherited IRAs from deaths after January 1, 2020. The IRS also clarified that the Five-year deferral rule is only available if the original owner died before their RBD. These clarifications help beneficiaries and advisors avoid confusion and costly mistakes.
Practical Examples
- Example 1:
Maria inherits a traditional IRA from her father, who died in 2019 at age 68 (before his RBD). Maria can choose the Five-year deferral rule and wait until December 31, 2024, to withdraw the entire account, or she can use the life expectancy method and take annual RMDs based on her age. -
Example 2:
John inherits a traditional IRA from his mother, who died in 2018 at age 75 (after her RBD). John cannot use the Five-year rule. He must use the life expectancy method and start taking RMDs by December 31, 2019. -
Example 3:
Susan is the sole beneficiary of her husband’s IRA. He died in 2017. Susan can treat the IRA as her own, make new contributions, and use her own RMD schedule, or she can remain a beneficiary and use the life expectancy method.
Common Mistakes to Avoid
- Missing the RMD deadline: Failing to take the required minimum distribution by December 31 can result in a 50% penalty on the amount you should have withdrawn.
- Not updating beneficiary designations: If the wrong person is listed as beneficiary, or if the beneficiary dies before the IRA owner, the account may have to be distributed faster than planned.
- Assuming the Five-year rule always applies: Remember, this rule is only available if the IRA owner died before their RBD.
Stakeholder Perspectives
According to analysis by VisaVerge.com, financial advisors and tax professionals agree that the ability to stretch distributions over a beneficiary’s life expectancy is a major advantage for those with pre-2020 inherited IRAs. This approach can lower annual taxes and allow the account to grow for many years. However, it is important to follow the rules closely to avoid penalties and make the most of this opportunity.
Official Resources
For the most up-to-date information, beneficiaries should review IRS Publication 590-B, which provides detailed instructions and tables for calculating RMDs. The IRS also maintains a helpful Retirement Topics – Beneficiary page with current rules and FAQs.
Actionable Takeaways
- If you inherited an IRA from someone who died before January 1, 2020, you can still use the life expectancy method or, in some cases, the Five-year deferral rule.
- Start taking RMDs by December 31 of the year after the owner’s death, unless you qualify for the Five-year rule.
- Spousal beneficiaries have more options and can treat the IRA as their own.
- Check all deadlines and beneficiary designations to avoid penalties.
- Consult a tax professional or financial advisor for personalized advice.
Conclusion
The rules for inherited IRAs from pre-2020 deaths remain stable and favorable for beneficiaries, allowing for tax-efficient withdrawals over many years. The IRS’s recent clarifications confirm that these accounts are not affected by the SECURE Act’s 10-year rule. Beneficiaries should continue to follow the established procedures, pay close attention to deadlines, and seek professional guidance to ensure compliance and maximize the benefits of their inherited IRA. For more details, always refer to the latest version of IRS Publication 590-B and consult with qualified advisors.
Learn Today
Inherited IRA → A retirement account passed to a beneficiary after the original owner’s death.
Required Minimum Distribution (RMD) → The minimum annual withdrawal amount the IRS mandates for inherited retirement accounts.
Five-year Deferral Rule → IRS rule allowing full withdrawal delay until five years after original IRA owner’s death.
Stretch IRA → A method allowing beneficiaries to take IRA distributions over their life expectancy.
Required Beginning Date (RBD) → The IRS-set age deadline when IRA owners must start taking minimum distributions.
This Article in a Nutshell
Inherited IRAs from pre-2020 deaths follow old stretch IRA rules, letting beneficiaries use life expectancy for withdrawals and avoid the SECURE Act’s new 10-year rule, ensuring tax-efficient, long-term distribution options with IRS clarifications confirming key deadlines and methods.
— By VisaVerge.com
