Inherited IRAs: Critical Internal Revenue Service (IRS) Updates for 2025

In 2025, significant rule changes for inherited Individual Retirement Accounts (IRAs) take full effect. Whether you’ve recently inherited a retirement account or are planning your estate, understanding these updates is essential to avoid costly tax missteps and optimize your strategy.

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✅ What’s Changed

1. The “Stretch IRA” era is over for most non-spouse beneficiaries. Under the SECURE Act of 2019 and SECURE 2.0 Act, if you inherit an IRA after January 1, 2020, and you are not a surviving spouse (nor an “eligible designated beneficiary”), you generally must fully deplete the account by the end of the 10th year following the original account-holder’s death. The Entrust Group+2Farther+2

2. Annual Required Minimum Distributions (RMDs) may now be required for many heirs starting in 2025. For inherited accounts from a decedent who had already begun RMDs, non-spouse beneficiaries must take annual withdrawals in years 1–9 (based on life-expectancy tables), then fully distribute by year 10. If the decedent died before their required beginning date (RBD), the 10-year rule applies, but annual RMDs might not apply. Capstone Access+2TIAA+2

3. Deadline reminders: first RMD, age 73, etc.

   • IRA owners who turned age 73 in 2024 must take their first RMD by April 1, 2025, and the second by December 31, 2025. IRS+1

   • Generally, the RMD starting age is age 73 (for many), though further increases are phased in for future years. IRS+1

⚠️ Why It Matters

• Tax timing matters: If you inherit a traditional IRA, distributions are taxed as ordinary income when withdrawn. Deferring too long or mis-calculating can push you into a higher tax bracket.

• Penalties are real: Failure to take required distributions could trigger a penalty up to 25% of the undistributed amount. FeldmanLawGroup+1

• Estate-planning ripple effects: The new inherited IRA rules affect how you structure beneficiary designations, trust vehicles, and legacy strategies. Even if you haven’t inherited an IRA yet, you ought to be planning ahead.

• Spousal vs non-spousal rules differ: Spouses retain more flexibility (including rolling the inherited IRA into their own IRA or treating it as their own). Non-spouse beneficiaries face the more rigid 10-year and annual withdrawal framework. Fidelity+1

🎯 Action Steps for You / Your Clients

• Review any inherited IRAs you hold (or know about). Determine the death date of the original owner, whether they had begun RMDs, and your beneficiary classification.

• Build a withdrawal schedule: If annual RMDs apply, map out expected withdrawals for years 1–9 and the final year to empty by year 10.

• Update your estate plan and beneficiary designations to reflect these rules. If you hold or intend to leave IRAs, consider how the 10-year rule might affect heirs.

• Consult tax and financial professionals: These rules can be complex and highly situation-specific. Getting advice early helps avoid surprises later.

• Communicate deadlines clearly: For example, if you inherited an IRA in 2022 from someone who had begun RMDs, expect annual RMDs starting 2025, and full distribution by end of 2032. Fidelity+1

  
  

Bottom line: The inherited IRA landscape has shifted significantly as of 2025. If you’re an heir—or planning to be one—understanding the new rules is no longer optional. Taking timely and informed action today can safeguard against unexpected tax burdens tomorrow.