The Clock Is Ticking for IRA Inheritors to Take Distributions

IRA | Inheritance | Required minimum distributions | February 4, 2026

“A little progress each day adds up to big results.”
―Satya Nani

When his wife, Kathy, inherited a $246,000 traditional individual retirement account from her mother last year, Brian Creighton said they felt blessed and wanted to be good stewards of the money.

The Creightons soon learned they had a deadline to deplete the account. 

The Internal Revenue Service issued final guidance last year that requires many people who inherited IRAs in recent years to take their first required minimum distributions by Dec. 31. For taxpayers in their working years such as the Creightons, both 54, that can mean a big tax hit. Distributions from inherited traditional IRAs count as income, and can move people into a higher tax bracket.

Under the new rules, most people who inherited accounts in 2020 or later, other than spouses, have to take the money out within 10 years, starting the year after the original IRA owner’s death. Those who inherited from someone who was taking required payouts, such as Kathy Creighton, have to take annual minimum payouts in years one through nine, and empty the account in year 10.

The IRS had delayed enforcing the annual payouts—until this year.

People who inherited before 2020 can use the old rules, which allow beneficiaries to stretch out distributions over their lifetimes, lessening the tax hit.

The Creightons are on top of the rules, but many inheritors are failing to take required distributions, not taking the right amount, or taking money from the wrong account, according to financial advisers. People are also still confused about special rules for children under 21, and estates and trusts.

Failing to take a required distribution can result in the IRS’s assessment of a penalty of 25% of the amount that should have been taken out.

In complicated cases, IRA custodians will tell inheritors to seek tax advice on distributions. Some tax professionals will in turn say to go to a financial planner for guidance.

“You get the runaround,” said Jeffrey Levine, chief planning officer with Focus Partners Wealth, in St. Louis. “It’s maddening for people.”

Minimum distributions are based on a formula that takes into account the IRA balance and the age of the recipient, among other factors.

The best strategy for handling inherited IRAs depends on the size of the IRA, the type of IRA, and personal tax situations. Inheritors who take only the annual minimum requirement face a balloon payout in the 10th year. That is the path the Creightons decided to take, drawing just $7,000 this year, and pushing larger distributions to retirement years, when they expect to be in a lower tax bracket. 

“If you play the game over the 10-year period, you can come out better,” said Brian Creighton, an airline captain.

Kathy, a librarian, also inherited a smaller Roth IRA that they are letting ride until 2034, since distributions from inherited Roth IRAs are generally tax-free. They tapped the brokerage account Kathy inherited to fund a scholarship at the University of Oklahoma to honor her parents. 

For some inheritors, it makes sense to split distributions more evenly over the 10-year period. That way, the tax hit is spread out instead of falling mostly in the final distribution year.

Younger inheritors who have to take minimum distributions can also time larger withdrawals to align with years when their tax rate is relatively low, such as when they start their first job after college. That is especially important for children whose investment income, including IRA distributions, is subject to the “kiddie tax” at their parents’ rate, Levine said. That can apply until age 23 if the child is a full-time student.

The calculus for older inheritors can be even trickier. They might also have to factor in taking money out of their own retirement accounts, which come with another set of rules. People typically have to start taking money out of their own traditional IRAs by April 1 of the year after turning 73.

Patrice Ingrassia, a 71-year-old retiree in Hartsdale, N.Y., inherited IRAs from her parents in 2021. She is planning to take the minimum distributions this year, just under $5,000. She is talking to her accountant about a multiyear plan, factoring in required withdrawals for her own various retirement accounts that will be starting soon.

“It’s human nature. You usually do what’s required of you and not much more,” she said. “The changing rules on this are enough to dizzy anyone.”

Those who donate to charity face another consideration. Starting at age 70 ½, making charitable gifts directly from a traditional IRA, regardless of whether it is inherited, can be tax-efficient. So it can pay to skip taking extra distributions now if you plan to make IRA gifts to charity when you are older.

Garrett Harbron, 55, who leads the wealth strategies team at Vanguard Group, inherited a traditional IRA after his father died last year. He is also among those keeping the money in as long as possible, and taking minimum distributions this year.

“I’m a big fan of letting that money grow tax-deferred for as long as I can,” he said.

Credit goes to Ashlea Ebeling, Wall Street Journal, December 22, 2025.

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This Week’s Author, Belinda Stickle