Inherited IRAs, Settled: Final Regulations Confirm Annual RMDs Inside the 10-Year Rule

What changed

On July 18, 2024, the IRS and Treasury released final regulations (T.D. 10001) governing required minimum distributions, including the treatment of inherited retirement accounts under the SECURE Act's ten-year rule. The regulations were published in the Federal Register the following day and run to roughly 260 pages in the IRS's pre-publication version.

The regulations resolve a question that has hung over inherited-IRA planning since the SECURE Act took effect: when a non-eligible designated beneficiary is subject to the ten-year payout rule, must that beneficiary also take annual distributions during the ten-year window, or only empty the account by the end of year ten?

The rule the regulations confirm

The final regulations adopt the position the IRS had taken in proposed form. The answer turns on whether the original account owner had already begun required minimum distributions:

• if the account owner died on or after the required beginning date, a non-eligible designated beneficiary must take annual required minimum distributions in years one through nine and fully empty the account by the end of year ten
• if the account owner died before the required beginning date, there are no annual distributions required in years one through nine; the only obligation is to empty the account by the end of year ten

In other words, the ten-year rule is not, for everyone, a single deadline at year ten. For beneficiaries of owners who had reached their required beginning date, it is a ten-year deadline layered on top of annual distributions — a "both/and," not an "either/or."

Why this caught so many off guard

When the SECURE Act eliminated the lifetime "stretch" for most non-spouse beneficiaries in favor of a ten-year payout, the widespread early reading was that a beneficiary could take nothing for nine years and distribute everything in year ten — maximizing tax deferral within the window. The IRS's proposed regulations rejected that reading, and the resulting uncertainty was significant enough that the agency repeatedly waived enforcement.

That waiver history is its own story. The IRS declined to penalize beneficiaries for not taking the annual within-ten-years distributions for 2021 and 2022 (under Notice 2022-53), again for 2023 (under Notice 2023-54), and once more for 2024 (under Notice 2024-35). Each waiver bought time but left the underlying question open. The final regulations close it.

The compression problem for those who waited

The relief was a kindness, but it created a trap for beneficiaries who took it as permission to do nothing. Consider a beneficiary who inherited in 2020 from an owner past the required beginning date, took no distributions through 2024 in reliance on the waivers, and now faces the final regulations. The annual distributions resume in 2025 — and the account still must be fully distributed by the end of the original ten-year window.

The arithmetic is unforgiving. Years of deferred distributions do not disappear; they get compressed into fewer remaining years, often pushing larger taxable distributions into a shorter period and potentially into higher brackets. A beneficiary who smoothed distributions across the full window would have spread the tax. A beneficiary who waited now has less runway to do so.

This is the practical heart of the development. The legal question is settled; the planning consequence falls hardest on those who treated the waivers as a holiday rather than a postponement.

What this means for beneficiaries and planners

The work now is to translate the final rule into account-by-account action:

• determine, for each inherited account, whether the original owner had reached the required beginning date — that single fact decides whether annual distributions apply
• for affected beneficiaries, build the annual distributions into 2025 and plan the remaining years of the window deliberately
• model the tax effect of the remaining distributions, especially for beneficiaries who deferred during the waiver years and now face compression
• coordinate inherited-account distributions with the beneficiary's broader income picture, since the timing within the window is where the planning value lives

For estate planners, the regulations also sharpen the case for revisiting beneficiary designations and considering whether trusts named as beneficiaries are positioned correctly under the finalized rules.

Key takeaways

• T.D. 10001 (released July 18, 2024) finalizes the inherited-IRA rules under the SECURE Act ten-year payout.
• If the original owner died on or after the required beginning date, the beneficiary must take annual RMDs in years one through nine and empty the account by year ten.
• If the owner died before the required beginning date, only the year-ten deadline applies.
• The penalty waivers covered 2021 through 2024; annual distributions are required beginning in 2025, and beneficiaries who deferred face compressed, larger distributions.

What to do now

1. Classify each inherited account by the owner's required beginning date.

That fact determines whether annual distributions apply during the ten-year window.

2. Build the 2025 distributions in now.

For affected beneficiaries, the annual RMDs resume in 2025. Plan them rather than scramble at year-end.

3. Model the compression for those who deferred.

Beneficiaries who relied on the waivers should run the tax effect of fitting the remaining balance into fewer years.

Bottom line

The four-year ambiguity over inherited IRAs is over. For many beneficiaries, the ten-year rule means annual distributions plus a final deadline — and the penalty holiday ends with 2024. The defensible response is to classify every inherited account now and plan the remaining distribution window deliberately, before the compression does the planning for you.