Your IRA goes to your named beneficiary — and the rules depend heavily on who inherits it. Spouses get the most options (roll to own IRA), while most non-spouse beneficiaries must empty the account within 10 years.
Beneficiary Options by Relationship
| Beneficiary | Traditional IRA Options | Roth IRA Options |
|---|---|---|
| Spouse | Roll to own IRA, treat as own, inherited IRA, lump sum | Roll to own Roth IRA, inherited Roth IRA, lump sum |
| Non-spouse individual | 10-year rule (empty by year 10) or lump sum | 10-year rule or lump sum (tax-free) |
| Minor child | Life expectancy until majority, then 10-year clock | Same |
| Disabled/chronically ill | Life expectancy distributions | Same (tax-free) |
| Person < 10 years younger | Life expectancy distributions | Same (tax-free) |
| Estate/charity | 5-year rule (if died before RMD age) or life expectancy | Same |
| Trust | Depends on trust type (see-through vs. non-see-through) | Same |
Spouse: Best Options
| Strategy | Tax Impact | Best When |
|---|---|---|
| Roll to own IRA | Defer taxes until your own RMDs | Spouse doesn’t need the money now |
| Treat as own (same as rollover) | Same as rollover | Under 59½ and wants to delay access |
| Inherited IRA | Take distributions without early withdrawal penalty | Under 59½ and needs access now |
| Lump sum | Full amount taxed at once | Small balance |
Spousal rollover is almost always the best choice — it maximizes tax deferral and gives full control.
Non-Spouse: 10-Year Rule
| Year | Requirement |
|---|---|
| Years 1-9 | No required annual withdrawals (but withdrawals are allowed) |
| Year 10 | Entire remaining balance must be withdrawn by Dec 31 |
Note: The IRS has indicated that if the original owner was already taking RMDs, annual distributions may be required during the 10-year period. Consult a tax advisor.
Tax Comparison: Traditional vs. Roth Inherited IRA
$400,000 inherited IRA, non-spouse, 24% bracket:
| Year | Traditional IRA (taxable) | Roth IRA (tax-free) |
|---|---|---|
| Withdrawal per year (even over 10) | $40,000 | $40,000 |
| Tax per year | $9,600 | $0 |
| Total received over 10 years | $304,000 | $400,000 |
| Total taxes paid | $96,000 | $0 |
Inherited IRA Rules
| Rule | Detail |
|---|---|
| No additional contributions | Cannot add money to an inherited IRA |
| No early withdrawal penalty | 10% penalty does NOT apply, regardless of age |
| Taxable (traditional) | Each distribution is taxed as ordinary income |
| Tax-free (Roth) | Tax-free if the original Roth was open at least 5 years |
| Must retitle the account | “Jane Smith as beneficiary of John Smith, deceased” |
| Cannot combine with your own IRA | Must keep separate |
Common Mistakes
| Mistake | Consequence |
|---|---|
| Not naming a beneficiary | IRA goes to estate — probate, delays, potentially higher taxes |
| Forgetting to update after divorce | Ex-spouse inherits |
| Non-spouse doing a rollover to own IRA | Treated as a taxable distribution — can’t be undone |
| Waiting until year 10 for all withdrawals | Massive tax bill (pushes into highest bracket) |
| Missing the 10-year deadline | 25% excise tax on the remaining balance |
The Bottom Line
Name a beneficiary and a contingent beneficiary on every IRA you own — it overrides your will. Spouses should almost always roll to their own IRA. Non-spouse beneficiaries should spread withdrawals over 10 years to minimize taxes. For Roth IRAs, the 10-year rule still applies, but the distributions are tax-free.
For more IRA guidance, see IRA withdrawal rules and what is an IRA. Return to the IRA hub.
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