RMD Rules for Inherited IRAs

If you've inherited an IRA, learn about the required minimum distributions (RMDs) you may need to take soon, as well as how RMDs work in the long run. The CARES act temporarily waives RMDs for all types of retirement plans for calendar year 2020. This includes the first RMD, which individuals may have delayed from 2019 until April 1, 2020.

Which rules governing RMDs apply to you depend on your relationship to the deceased original owner. The relationships fall into three categories:

  • Spouse inheritors
  • Non-spouse inheritors, such as son, daughter, brother, sister, or friend of the original owner
  • Entity inheritors, such as a trust, estate, or non-profit organization

Review the guidelines below "For All," and then review the tab that applies to you specifically.

Penalty for missing required distributions

If you don't take the required minimum distributions from your account, you will be subject to a penalty equal to 50% of the amount that should have been withdrawn.

Inheriting a Roth IRA

If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take RMDs. As long as the assets have been in the Roth IRA for five or more years, these RMDs can be withdrawn federally tax-free.

Required Distributions

For those whom the original account owner died December 31st, 2019 or before:

The 5-year rule

If the original account owner died prior to age 70?, you (as the non-spouse or entity beneficiary) may choose to elect to use the 5-year rule. Generally, this rule applies if the original owner died before April 1 of the year following the year the original owner would have turned age 70?.

Under the 5-year rule:

  • You can withdraw from your inherited IRA assets at any time, in any amount.
  • You must withdraw all assets by December 31 of the 5th anniversary year of the IRA owner's death.

As long as the account is depleted within this time-frame, the RMD penalties can generally be avoided.

Example:
Year of death: 2011
Fifth year after the year of death: 2016
Deadline for depleting the account: December 31, 2016

Note, assets withdrawn from inherited IRAs will be included as ordinary income and are taxable as such (see above for inherited Roth IRAs). This may impact your taxes significantly. Talk to a tax advisor if you plan to use this option.


For those whom the original account owner died January 1, 2020 or after:

The 10-year rule

If you are not an eligible designated beneficiary,1 or trust or other entity, you must withdraw all assets from the inherited IRA within 10 years.

Under the 10-year rule:

  • You can withdraw from your inherited IRA assets at any time, in any amount within the 10-year time-frame.
  • You must withdraw all assets by December 31 of the 10th anniversary year of the IRA owner's death.

As long as the account is depleted within this time-frame, the RMD penalties can generally be avoided.

Example:
Year of death: 2020
Tenth year after the year of death: 2030
Deadline for depleting the account: December 31, 2030

Note, assets withdrawn from inherited IRAs will be included as ordinary income and are taxable as such (see above for inherited Roth IRAs). This may impact your taxes significantly. Talk to a tax advisor if you plan to use this option

Please note that the information provided by Fidelity Investments is general in nature and should not be considered legal or tax advice. Fidelity does not provide legal, or tax advice. Consult with a legal or tax professional regarding your unique tax situations.

When you inherit an IRA from your spouse, you have a choice to make that other inheritors don't: you can roll over the assets into your own IRA. You can also transfer the assets into an Inherited IRA, as all other beneficiaries can. Depending on which option you choose, different RMD rules apply.

Option 1: Roll the inherited assets into your own IRA

If you choose to roll over the assets into your own IRA, then you would follow the regular RMD rules for your IRA. These rules require RMDs begin once you reach age 722 and are based on your own age using the IRS Uniform Life Expectancy Table (PDF).

The table assumes that distributions would extend over two lives: yours and a beneficiary 10 years younger than you. With this option, your RMD would be lower than if you transferred your assets to an Inherited IRA.

Choosing this option can be advantageous if:

  • You have not yet reached age 722 but your spouse had. It enables you to stretch out the tax-deferral of IRA assets by delaying distributions until you reach age 72.2

Conversely, rolling the assets to your own IRA may not be advantageous if:

  • You are under age 59?, and you intend to take a distribution from your IRA. You will be subject to the 10% early withdrawal penalty in your IRA but would not be subject to this penalty from an Inherited IRA.

Option 2: Transfer the assets to an Inherited IRA

If you choose to transfer the assets to an Inherited IRA, the amount of your RMDs will be based on your age and be recalculated each year based on the factors in the IRS Single Life Expectancy Table. A benefit of this option is that distributions from an Inherited IRA, no matter what your age, are not subject to the 10% early withdrawal penalty.

The timing of the initial distribution may be based on your spouse's age at the time of his/her death. If your spouse was:

  • Older than age 72,2 you must begin taking RMDs by December 31 of the year following your spouse's death.
  • Younger than 72,2 you may be able to delay RMDs until your spouse would have turned 72.

Transferring your assets to an Inherited IRA may be advantageous if you are:

  • Older than your spouse and your spouse died before age 72,2 since this option would allow you to delay taking the RMDs until the year your spouse would have turned age 72.
  • Younger than age 59? and you need access to these assets immediately, since you would not be subject to a 10% early withdrawal penalty.

If you'd like to convert to Roth IRA

Whether you move the inherited assets to your existing IRA or open a new IRA, you have the option of converting to a Roth IRA. Be aware, however, that when converting to Roth, you will have to pay any taxes due at the time you convert.

Consult an inheritor services specialist at 800-544-0003 for more information if you are interested in converting an Inherited IRA to a Roth IRA.

If you wish to make immediate withdrawals

When you move the inherited assets to your own account may make a difference if you need immediate cash.

If you need some of the assets right away and you are under age 59?, you may want to put some or all of the assets into an Inherited IRA immediately. Since distributions from that account will not have a 10% early withdrawal penalty that would apply to your own IRA, this option may be a good one if you need that immediate access to cash.

However, if you do not need those assets immediately or you are over age 59?, putting those assets into your own IRA might make the most sense. Since you are over age 59?, there will not be early withdrawal penalties.

For those whom the original account owner died December 31st, 2019 or before:

In addition to the option of withdrawing all money from the inherited IRA within 5 years, as discussed in the 'for all' section, non-spouse beneficiaries have the option to take Required Minimium Distributions over their lifetime. Generally, the IRS requires non-spouse beneficiaries to begin taking RMDs from the inherited assets beginning in the year following the year of death of the original owner. The first RMD must be taken from the newly established Inherited IRA by December 31 of that next year. So if the original owner died in 2019, then the first RMD must be taken by December 31, 2020.

As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year RMD. For each year after, you would subtract one year from the initial life expectancy factor.


For those whom the original account owner died January 1, 2020 or after:

As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA and you will need to withdraw all assets from the inherited IRA within 10 years following the death of the original account holder. Exceptions to the 10-year distribution requirement applies to assets left to an eligible designated beneficiary.1

When there are multiple beneficiaries

When IRA assets are inherited by several individuals, each beneficiary should set up their own Inherited IRA by December 31 of the year following the year of death.

Any beneficiaries who do not separate their inherited IRA assets by that date will generally need to base their RMDs on the age of the oldest remaining beneficiary on the account as of December 31.

Inheriting a Roth IRA

If you inherit a Roth IRA and roll over to an Inherited Roth IRA, you must take RMDs (unlike the original owner, who was exempt from RMDs during their lifetime). The assets must be moved to an inherited IRA and the same rules apply for separating the assets as when there are multiple beneficiaries.


For those whom the original account owner died December 31, 2019 or before:

In addition to the option of withdrawing all money from the Inherited Roth IRA within 5 years, as discussed in the 'for all' section, non-spouse beneficiaries have the option to take Required Minimum Distributions over their lifetime. You must begin taking RMDs in the year after the year of death, using your age and the IRS Single Life Expectancy Table for RMD calculations. As long as the assets have been in the Roth IRA for 5 or more years, these RMDs can be taken tax-free.


For those whom the original account owner died January 1, 2020 or after:

You will need to withdraw all assets from the Inherited Roth IRA within 10 years following the death of the original account holder. Exceptions to the 10-year distribution rule applies to assets left to an eligible designated beneficiary.1

If the beneficiary is an entity, charity, or non-qualifying trust, and the owner was still living by April 1 of the year in which the account holder reached age 72,2 the distributions would be based on the remaining Single Life Expectancy of the IRA owner. If the owner was younger than 72,2 the assets must be completely distributed by December 31 of the 5th year containing the anniversary of the IRA owner's death.

Consult your tax advisor to determine if an exemption may apply to the trust.

Next steps

Set up automatic withdrawals

Simplify your RMDs by letting Fidelity help ensure you meet IRS requirements and deadlines.

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See how our Retirement Distribution Center can help you calculate and manage your RMDs for your Fidelity IRAs.

Open an Inherited IRA

Open an account with Fidelity to claim your inherited assets and continue the account's tax-deferred growth.