The Ten-Year Rule and Eligible Designated Beneficiaries

Most inherited individual retirement accounts (IRAs) must be fully liquidated by December 31 of the tenth year following the owner’s death. This rule applies to adult children, grandchildren, and most trusts. However, IRC §401(a)(9)(E)(ii) exempts Eligible Designated Beneficiaries (EDBs) from the ten-year rule, allowing them to stretch distributions over their single life expectancy:

1.

Surviving Spouses: A spouse can stretch distributions over their life expectancy or execute a spousal rollover, treating the inherited IRA as their own. Since 2024 there is a third option that is frequently the best of the three: under SECURE 2.0 §327 a surviving spouse may elect to be treated as the deceased employee for RMD purposes. That defers the first distribution until the year the deceased spouse would have reached their required beginning date—valuable when the survivor is older than the decedent—and then computes the RMD off the Uniform Lifetime Table instead of the Single Life Table, which produces a materially smaller required withdrawal every year thereafter. The final RMD regulations implement it for calendar years beginning on or after January 1, 2025. Run all three before defaulting to the rollover.

2.

Minor Children of the Decedent: The child can take life-expectancy distributions until they reach age 21, at which point the ten-year depletion clock begins.

3.

Disabled or Chronically Ill Individuals: The disability or illness must meet the strict statutory definitions under IRC §72(m)(7) or IRC §7702B(c)(2) at the decedent’s death.

4.

Individuals Not More Than Ten Years Younger: Typically siblings or close-in-age companions.