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Ask the Expert: What are the rules governing IRA successor beneficiaries?

You've written that individual retirement account beneficiaries must empty an inherited account within 10 years. What if a beneficiary dies after five years? Does the next person who inherits the IRA also have 10 years to empty it, or only the remaining five years?

It depends on who that first beneficiary was.

Let’s recap the rules. With a few important exceptions, people who inherit an IRA after Dec. 31, 2019, must empty it no later than 10 years after its original owner's death. But they’re not required to take any distributions before that deadline.

An earlier rule applies to beneficiaries who inherited IRAs before Jan. 1, 2020. The old rule also applies to surviving spouses, disabled and chronically ill individuals, beneficiaries not more than 10 years younger than the original owner, and that person’s minor children up to the age of majority. All these beneficiaries can empty an inherited IRA over their own life expectancies; and they must take minimum annual distributions from the accounts.

Clear so far? OK.

If you're the successor beneficiary of a beneficiary to whom the old rules applied, you must empty the account within 10 years of that person's death.

But if you're the successor of a beneficiary to whom the new 10-year rule applied, you get only what's left of that person's 10 years.

An example: Sam died on Feb. 1, 2020. His daughter Karen, who inherits his IRA, must empty it no later than Feb. 1, 2030. She names her son Michael as her successor on the IRA beneficiary designation form. (That form — not her will — controls what happens to the IRA.) Karen dies in 2025. Michael must empty the IRA by the original 2030 deadline.

The bottom line

The rules governing IRA beneficiaries depend on when, and from whom, they inherited the IRA.

More information

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