Inherited $500,000 IRA Requires Yearly Withdrawals When the Original Owner Took RMDs
A 54-year-old daughter inherits a $500,000 traditional IRA from a father who had already begun required minimum distributions. Under IRS rules, she must take annual withdrawals rather than waiting until year 10, and a lump-sum withdrawal then would be stacked on her salary. Spreading withdrawals across the 10-year period, especially in lower-income years, can reduce the tax burden.
The daughter is an adult child, so she is a designated beneficiary but not an eligible designated beneficiary. That means the inherited traditional IRA must be emptied by December 31 of the tenth year after her father’s death. Because he had already reached his required beginning date, annual minimum withdrawals are also required during that window.
Those yearly amounts are based on the longer of her single life expectancy or her father’s remaining life expectancy. If he had not taken his year-of-death distribution, she must take it. Had he died before his required beginning date, no annual withdrawals would be required before the final year.
This rule may affect adult children and other non-eligible beneficiaries who inherit traditional IRAs after the owner began RMDs. It could shape retirement and estate planning, prompting families to consider annual withdrawals and bracket management. Financial advisers may see more demand for multiyear distribution strategies. The broader impact may be limited to affected households, though it could influence how inherited retirement wealth is spent, saved, or taxed over a decade.