The Internal Revenue Service spent four years quietly walking back the most contested provision of the SECURE Act, then ran out of patience. On July 19, 2024, Treasury and the IRS finalized regulations confirming that non-spouse beneficiaries who inherit a traditional IRA from an owner already taking required minimum distributions must take annual RMDs in years one through nine of the 10-year window. The 2021 through 2024 penalty waivers expired with the 2024 tax year. The 2025 tax year became the first under full enforcement. In 2026, every family that inherited an IRA between 2020 and 2023 is now mid-window, every missed distribution from 2025 is still penalty-exposed, and advisors with affected client households are out of room to defer the conversation.
The structural problem is large. Fidelity Investments processed inherited IRA distributions on more than 1.1 million beneficiary accounts in 2025. Vanguard’s Inherited RMD Calculator received a roughly 38% traffic increase between September 2025 and February 2026 according to disclosures in the firm’s Q1 2026 retirement insights brief. Neither figure captures the meaningful slice of beneficiaries who, per Greenbush Financial Group and FIG Marketing client surveys, were unaware they owed a 2025 RMD because they inherited before age 73 from a decedent who had already triggered the required beginning date.
Key takeaways
- Treasury finalized the inherited IRA RMD regulations on July 19, 2024, ending a four-year cycle of penalty waivers issued in IRS Notices 2022-53, 2023-54, 2024-35.
- The 2025 tax year is the first in which non-spouse beneficiaries owe annual RMDs in years one through nine of the 10-year window, with full enforcement now active for 2026.
- SECURE 2.0 cut the excise tax from 50% to 25%, and to 10% if a missed distribution is corrected within a two-year window via Form 5329.
- The annual RMD requirement only applies if the original owner died on or after their required beginning date (generally April 1 following age 73 for deaths after 2023).
- Eligible designated beneficiaries (surviving spouses, minor children, the chronically ill, beneficiaries within 10 years of the decedent’s age) remain exempt from the 10-year window.
- A 2026 mid-window beneficiary holding a high-balance inherited IRA who waits until year 10 faces an income concentration risk significant enough to justify a multi-year bracket-filling plan now.
What changed on July 19, 2024 and why 2026 is the first uncushioned year
The SECURE Act of 2019 created the 10-year rule but left the annual RMD question ambiguous. Practitioner consensus, including the initial reading from the IRS itself, was that no annual distributions were required so long as the full account was drained by December 31 of year 10. In February 2022, proposed regulations reversed that reading and asserted that annual RMDs apply if the decedent had already started taking distributions. The reversal blindsided beneficiaries who had spent 2020 and 2021 deferring on the assumption they had a decade of flexibility.
Treasury responded with four consecutive penalty waivers. IRS Notice 2022-53 covered 2021 and 2022. Notice 2023-54 extended the waiver to 2023. Notice 2024-35 added 2024. The July 19, 2024 final regulations confirmed the proposed reading and, critically, announced that no further waivers would issue. The 2025 RMD became the first with skin in the game. The 2026 RMD now sits on top of a missed-2025 problem for every household that did not act in time.
The penalty itself was rewritten by SECURE 2.0. The excise tax for a missed RMD fell from 50% to 25% effective January 1, 2023, and the IRS will reduce it further to 10% if the beneficiary takes the corrective distribution and files Form 5329 within the two-year window the statute provides. The Wolters Kluwer expert insights brief on missed RMDs notes that the IRS will also waive the excise tax entirely if the beneficiary attaches a reasonable cause letter to Form 5329 and demonstrates that reasonable steps are being taken to remedy the shortfall. Practitioners report that first-time-miss waiver requests are still being granted in 2026, but only when the request precedes any IRS notice.
Who owes an annual RMD in 2026 and who does not?
The 10-year rule applies to non-eligible designated beneficiaries, which is the IRS shorthand for adult, non-spouse heirs who do not qualify for one of the SECURE Act exemption categories. The annual RMD requirement within the 10-year window splits along one question: did the original IRA owner die before or after their required beginning date?
For deaths on or after the required beginning date, the beneficiary must take an annual RMD calculated using the IRS single life expectancy table and the beneficiary’s age in the year following the year of death, with the divisor reduced by one each subsequent year. The account must still be emptied by December 31 of year 10. The Fidelity beneficiary distribution materials and the Vanguard RMD rules page both reflect this calculation method as the post-2024 standard.
For deaths before the required beginning date, no annual RMD is required during the 10-year window. The beneficiary may take distributions in any amount and at any time, or take a single lump-sum distribution in year 10. The flexibility survives, but only for the smaller subset of inheritances where the decedent died before triggering RMDs (now age 73 for those reaching 72 after December 31, 2022 under SECURE 2.0 §107).
Eligible designated beneficiaries fall outside the 10-year window entirely. The category includes surviving spouses, minor children of the decedent (until they reach the age of majority), the chronically ill or disabled as defined under IRC §7702B(c)(2) and §72(m)(7), and individuals who are not more than 10 years younger than the decedent. Surviving spouses retain the additional option of treating the inherited IRA as their own, which has substantial planning value when the surviving spouse is younger than the decedent.
How much is at risk if a client missed a 2025 RMD?
Consider a 56-year-old beneficiary who inherited a $1.2 million traditional IRA in February 2024 from a 78-year-old parent already taking RMDs. The 2025 single life expectancy divisor for a 55-year-old (age in the year following death) is 31.6. The 2025 RMD obligation was approximately $37,975. If unwithdrawn, the standard excise tax is 25% of the shortfall, or $9,494. If the beneficiary takes the corrective distribution before December 31, 2027 and files Form 5329 with the reduced-penalty election, the assessment drops to $3,797. A reasonable cause waiver, if granted, eliminates it.
The 2026 RMD obligation for the same beneficiary uses divisor 30.6 against the December 31, 2025 balance. At an assumed 2025 portfolio return of 4.2%, the December 31, 2025 balance is approximately $1,209,420 (post-RMD), and the 2026 RMD is approximately $39,524. The 2025 miss and the 2026 obligation are independent. A beneficiary who corrects the 2025 shortfall in 2026 still owes 2026 RMD by December 31, 2026.
What practitioner strategies are actually moving the needle in 2026?
Three planning levers have emerged from advisor practice notes published this spring by Greenbush Financial Group, FIG Marketing, and the Kiplinger Tax Letter.
Multi-year bracket smoothing. A 10-year window forces the bulk of taxable distributions into a defined runway. Advisors who model the entire 10 years for high-balance beneficiaries (typically $750K and above) report material savings over the do-nothing alternative of taking only the annual minimum and absorbing a large balloon in year 10. The bracket-filling math favors larger discretionary distributions in years when the beneficiary’s other income is lower (gap years between employment, post-retirement and pre-Social Security, sabbaticals, business losses).
Roth treatment for inherited Roth IRAs. The 10-year rule applies to inherited Roth IRAs as well, but the calculus inverts. Distributions are tax-free. The Motley Fool’s March 2026 inherited IRA analysis and the Kiplinger Tax Letter both recommend deferring inherited Roth withdrawals until year 10 in nearly every case, allowing the maximum compounding inside the Roth wrapper before the mandatory distribution. The risk is concentrated in beneficiaries who inherit before age 30 and who could benefit from holding the wrapper for the full decade with no incremental tax cost.
Qualified charitable distribution coordination. A beneficiary aged 70½ or older may direct up to $108,000 in 2026 (indexed from $105,000 in 2025) from the inherited IRA directly to a qualified 501(c)(3) and satisfy the year’s RMD with no inclusion in adjusted gross income. The strategy has growing traction in Donor-Advised Fund conversations, where the inherited IRA RMD becomes the funding source for charitable intent the client previously satisfied from after-tax assets.
What advisors should be asking clients in the next 30 days
Three questions Kiplinger’s tax-letter editors recommend advisors put to any household with an inherited IRA opened between 2020 and 2024:
- Was the original owner already taking RMDs at the date of death? If yes, the annual RMD requirement applies in 2026 regardless of what the beneficiary did in 2021 through 2024.
- Was a distribution taken in 2025, and if so, did it equal or exceed the calculated RMD? If no distribution was taken or it fell short, the Form 5329 corrective filing should be on the desk within the next 90 days.
- What is the projected year-10 balance under current allocation, and what does the marginal tax cost look like if that balance is forced out in a single year? The beneficiaries most exposed are the high-income professionals in their 40s and 50s whose year-10 tax rate is almost certainly higher than the bracket they could fill in 2026 through 2030.
The IRS has spent four years signaling that this enforcement was coming. The 2025 tax year removed the cushion. The 2026 tax year is the first in which a missed-RMD-plus-missed-RMD problem can compound across a beneficiary’s account. Advisors who run a five-minute screen across the household book for inherited IRAs with dates of inheritance 2020 through 2023 will identify the exposed clients faster than the IRS notices will reach them. The cost of a Form 5329 reasonable-cause filing in May is materially lower than the cost of an IRS CP-15 notice in October.
For related coverage, see our analysis of IRS Notice 2026-13 and the 402(f) safe harbor rewrite, the IRS 2026 retirement contribution limits, and the SECURE 2.0 super catch-up provisions for ages 60-63.
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