Key Points
Naming Beneficiaries
The tax code permits an IRA owner to designate beneficiaries who will inherit the account assets upon death. These assets pass directly to the named beneficiary outside the probate system — and regardless of the terms of the account holder's will — unless the estate is named as beneficiary.
Any number of individuals or entities may be named as beneficiary of an IRA, including:
- A surviving spouse
- Children or grandchildren
- Other family or non-family members
- The account holder's estate
- Trusts
- Charitable organizations
An IRA owner's right to change beneficiaries continues until death. Beneficiary designations are made directly on the IRA's beneficiary designation form, which supersedes any conflicting provisions in the owner's will.
IRA owners should name both a primary beneficiary (first in line to inherit) and one or more contingent beneficiaries (who inherit if the primary beneficiary predeceases the owner or disclaims the inheritance). Beneficiary designation forms may be customized to address a wide range of contingencies, including per stirpes distributions to the descendants of a predeceased beneficiary.
Surviving Spouse Beneficiary
A surviving spouse named as beneficiary has the broadest set of options for handling an inherited IRA. The surviving spouse may:
- Roll the IRA into their own IRA — treating the inherited funds as their own, delaying RMDs until they reach their own applicable RMD age (73 or 75)
- Remain as beneficiary — keeping the account as an inherited IRA and taking distributions based on the surviving spouse's own life expectancy, with the ability to delay distributions until the year the deceased would have reached RMD age
- Take a lump-sum distribution — fully taxable as ordinary income
The rollover option is generally the most advantageous for a surviving spouse who does not need immediate income, as it preserves tax deferral for the longest possible period.
Maria, age 58, inherits her husband's IRA upon his death at age 62. If she rolls it into her own IRA, she will not be required to take RMDs until she reaches age 73 (or 75, if born after 1959). If instead she remains as beneficiary of the inherited IRA, she may delay distributions until the year her husband would have turned 73, then take distributions over her own life expectancy.
Non-Spouse Beneficiaries
Under the SECURE Act of 2019, most non-spouse beneficiaries who inherit an IRA must withdraw all assets within 10 years of the account owner's death.
Whether annual distributions are required during the 10-year period depends on when the owner died:
- Owner died before RMDs began: No annual distributions are required. The beneficiary may take any amount at any time during years 1–10, as long as the account is fully distributed by the end of year 10.
- Owner died after RMDs began: The beneficiary must take annual distributions during years 1–9 (at least as fast as required under the applicable life expectancy table), with the full remaining balance withdrawn by the end of year 10.
Certain categories of beneficiaries — called Eligible Designated Beneficiaries (EDBs) — are exempt from the 10-year rule and may instead take distributions over their own life expectancy. EDBs include:
- Surviving spouses
- Minor children of the deceased owner (until they reach the age of majority, after which the 10-year rule applies)
- Disabled individuals (as defined by the IRS)
- Chronically ill individuals
- Individuals not more than 10 years younger than the deceased account owner
If no beneficiary is named, or if the estate or a non-qualifying entity (such as most trusts) is named as beneficiary, different rules apply:
- If the owner died before RMDs began, the entire account must be distributed within 5 years of death.
- If the owner died after RMDs began, distributions must continue at least as rapidly as the schedule that was in effect at death.
| Beneficiary Type | Distribution Rule |
|---|---|
| Surviving spouse | Roll over to own IRA, or life expectancy distributions, or lump sum |
| Eligible Designated Beneficiary (disabled, chronically ill, within 10 yrs of age) | Life expectancy distributions over own lifetime |
| Minor child of owner | Life expectancy until majority, then 10-year rule |
| Most non-spouse beneficiaries (owner died before RMDs) | 10-year rule — no annual RMDs required; full withdrawal by end of year 10 |
| Most non-spouse beneficiaries (owner died after RMDs began) | 10-year rule — annual RMDs required years 1–9; full balance by end of year 10 |
| Estate / non-designated beneficiary | 5-year rule (if owner died before RMDs) or at least as fast as prior schedule |
Estate Taxation of IRA Assets
Generally, the value of an IRA is includable in the decedent's gross estate and is subject to federal estate taxation. This is true whether the IRA assets pass into the decedent's estate or directly to named beneficiaries.
Assets passing to a surviving spouse qualify for the unlimited marital deduction, which defers any federal estate tax until the surviving spouse's own death. Assets passing to other beneficiaries do not receive this deferral and are subject to estate tax if the total taxable estate exceeds the applicable exemption amount ($13,990,000 per person in 2026, indexed for inflation). For most families, the federal estate tax does not apply.
Beneficiaries who receive IRA distributions — whether as a lump sum or as periodic payments — must include those distributions in their taxable income in the year received. Distributions are taxed as ordinary income.
If IRA income is paid into the decedent's estate (rather than directly to a named beneficiary), it is also subject to income tax at the estate level. Because estates may reach the top income tax bracket quickly, distributions directly to individual beneficiaries are generally more tax-efficient than distributions through an estate.