Quick Answer
The stretch IRA was mostly eliminated in 2020. Non-spouse beneficiaries now face a 10-year distribution rule, requiring full account depletion by December 31st of the 10th year after inheritance. Only eligible designated beneficiaries (spouses, minor children, disabled individuals, and those within 10 years of the deceased's age) can still stretch distributions over their lifetime.
Best Answer
Michelle Woodard, JD
Those planning estate strategies for substantial retirement account balances
How the 10-year rule replaced stretch IRAs
The SECURE Act fundamentally changed inherited IRA rules effective January 1, 2020. Previously, non-spouse beneficiaries could "stretch" required minimum distributions (RMDs) over their entire life expectancy, potentially extending tax-deferred growth for decades. Now, most beneficiaries must empty inherited accounts within 10 years.
Who can still use stretch provisions
Only "eligible designated beneficiaries" (EDBs) can stretch distributions:
Example: $500,000 IRA inheritance impact
Consider a 45-year-old inheriting a $500,000 traditional IRA from a parent:
Old stretch rule (pre-2020): Could take RMDs over 38.8 years (IRS life expectancy table), starting with ~$12,900 in year one. Remaining balance could grow tax-deferred for decades.
New 10-year rule: Must withdraw entire $500,000 by December 31st of the 10th year. If the account grows at 6% annually and withdrawals are back-loaded, the beneficiary faces a massive tax hit in year 10.
Strategic withdrawal timing under 10-year rule
*Assumes 6% annual growth and no other income changes*
New planning strategies post-SECURE Act
Roth conversions before death: Convert traditional IRA assets to Roth IRAs during your lifetime. While you pay taxes now, beneficiaries still get 10 years but withdraw tax-free.
Charitable remainder trusts: For high-net-worth individuals, naming a CRT as beneficiary can provide income streams to heirs while reducing estate taxes.
Life insurance planning: Use IRA RMDs to fund life insurance premiums, creating tax-free death benefits for heirs.
Special rules for inherited accounts with RMDs
If the original owner died after their required beginning date (age 73), beneficiaries must take annual RMDs during the 10-year period based on their own life expectancy, PLUS empty the account by year 10.
What you should do
Review your estate plan if you have substantial retirement accounts. The stretch elimination means larger tax burdens for your heirs. Consider Roth conversions, especially if you're in lower tax brackets now than your beneficiaries will be. Use our return-scanner to identify current tax-saving opportunities that free up cash for conversions.
Key takeaway: The stretch IRA is mostly dead, but eligible designated beneficiaries can still stretch distributions over their lifetime. For everyone else, strategic withdrawal timing during the 10-year period can save thousands in taxes.
Key Takeaway: Most inherited IRAs now follow the 10-year rule, but strategic withdrawal timing can save $15,000-35,000 in taxes compared to waiting until year 10.
Comparison of distribution options for eligible vs. non-eligible beneficiaries
| Beneficiary Type | Distribution Rule | Tax Impact | Planning Opportunity |
|---|---|---|---|
| Surviving spouse | Lifetime stretch or spousal rollover | Lowest - spread over lifetime | Convert to Roth gradually |
| Adult children (non-EDB) | 10-year rule | High - compressed timeframe | Strategic annual withdrawals |
| Minor children | Stretch until majority, then 10-year | Moderate early, high later | Plan for transition at majority |
| Disabled beneficiaries | Lifetime stretch | Lowest - spread over lifetime | Maintain EDB qualification |
| Charitable remainder trust | Trust term (up to 20 years) | Moderate - income stream | Estate tax deduction benefit |
More Perspectives
Robert Kim, CPA
Those in retirement concerned about minimizing tax burdens on their children
Planning for your children's inheritance
As a retiree, the SECURE Act changes how you should think about leaving retirement accounts to your adult children. Your kids will likely face higher tax rates than you originally planned for, especially if they inherit during their peak earning years.
The Roth conversion opportunity
Many retirees are in lower tax brackets than their working-age children. This creates a conversion opportunity:
Example scenario: You're 70, in the 12% tax bracket with $400,000 in traditional IRA assets. Your 45-year-old daughter is in the 24% bracket. Converting $20,000 annually to Roth costs you $2,400 in taxes but saves her $2,400 when she inherits.
Timing your required minimum distributions
If you're taking RMDs, coordinate with your overall tax strategy. Consider bunching deductions in alternate years or timing charitable donations to offset RMD income.
Communication with your heirs
Discuss the 10-year rule with your beneficiaries. They need to understand they'll face a mandatory distribution schedule that could push them into higher tax brackets during their peak earning years.
Key takeaway: The elimination of stretch IRAs means your retirement planning should now include tax planning for your heirs, making Roth conversions more attractive than ever.
Key Takeaway: Retirees in lower tax brackets should seriously consider Roth conversions to reduce their heirs' future tax burdens under the 10-year rule.
Michelle Woodard, JD
Those with substantial assets requiring sophisticated estate planning strategies
Advanced strategies for substantial retirement accounts
High earners face unique challenges under the new rules. Large inherited IRAs combined with the 10-year requirement can push beneficiaries into the highest tax brackets, potentially triggering the 3.8% net investment income tax on top of ordinary income rates.
Charitable remainder trust (CRT) strategy
For IRAs over $1 million, consider naming a CRT as beneficiary:
Split beneficiary approach
Divide large IRAs among multiple beneficiaries to spread tax burden:
Generation-skipping considerations
The 10-year rule applies to each generation. Grandchildren still get their own 10-year period if parents disclaim or die before distribution, but generation-skipping tax implications become more complex.
Key takeaway: High-net-worth individuals need comprehensive strategies beyond simple beneficiary designations to minimize the tax impact of the SECURE Act changes.
Key Takeaway: For estates over $1 million in retirement accounts, charitable remainder trusts and split beneficiary strategies can significantly reduce overall tax burden compared to traditional beneficiary planning.
Sources
- IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs)
- SECURE Act of 2019 — Setting Every Community Up for Retirement Enhancement Act
Reviewed by Michelle Woodard, JD on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.