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2025 IRS Updates: Inherited IRAs

  • Writer: Natalya Arjantseva
    Natalya Arjantseva
  • Oct 21
  • 2 min read

If you’ve inherited (or may someday inherit) an IRA, 2025 brings rule changes that directly affect how and when you take money out. These aren’t minor tweaks; your tax plan may need a reset.


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The Two Big Shifts

  1. Annual RMDs on most inherited IRAs (starting 2025). Most beneficiaries now have to take required minimum distributions every year. Skip them and you could face a penalty of up to 25%, reduced to 10% if you fix it quickly. That’s real money; build the withdrawals into your calendar.

  2. The 10-Year Rule is being enforced. If you’re a non-spouse beneficiary, you must empty the inherited IRA within 10 years of the original owner’s death, and that’s on top of the annual RMDs in most cases. Translation: no more “let it ride for decades.”


(For context, these are the critical IRS updates for 2025 addressed in the underlying guidance.)

Who Does/Doesn't Get Flexibility

Surviving spouses have options:

You can assume ownership of the IRA or keep it as a beneficiary account. Roth IRAs add flexibility with tax-free growth and no RMDs; a meaningful lever if that fits your situation.


Minor children of the decedent get a longer runway:

They can keep drawing until age 31, and the 10-year clock starts at age 21. Plan the withdrawal path across that window to avoid bracket creep.


Disabled beneficiaries may qualify for an indefinite exemption from the 10-year rule. If this applies, confirm status and document it - this is a structural advantage you don’t want to miss.


How to Pull Money Without Torching Your Tax Bracket

The mechanics are simple; the discipline is not:

  • Evenly spread withdrawals over the 10 years to dampen tax spikes. This smooths income and typically lowers the chance you tip into a higher bracket.

  • Time distributions around expected tax-rate changes (yours or law-driven). When you know a lower-income year is coming, front-load. If next year looks fatter, hold within the rules.


Takeaways

For most non-spouse heirs, 2025 means annual RMDs plus a hard 10-year finish line. Spouses and certain beneficiaries get different lanes, but everyone needs a concrete schedule to avoid penalties and needless taxes. Set your withdrawal plan now and stick to it.

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