The 10-year rule is a distribution rule that applies to certain beneficiaries who inherit an IRA or employer-sponsored retirement plan account. Under the rule, the entire inherited account must be distributed by December 31 of the 10th calendar year following the year of the account owner’s death.
How distributions must be taken during the 10-year period depends on whether the account owner died before or on or after the required beginning date (RBD):
- Death before the RBD: No annual RMDs are required during years 1 through 9 under the 10-year rule. The beneficiary may take distributions at any time and in any amount, provided the entire account is distributed by the end of year 10.
- Death on or after the RBD: Annual RMDs are required during years 1 through 9, based on the applicable life expectancy rules. Any remaining balance must be distributed by the end of year 10.
Example:
John dies in 2026, and his adult daughter, Lisa, is subject to the 10-year rule. Lisa must fully distribute the inherited account by December 31, 2036.
If John died before his RBD, Lisa is not required to take annual RMDs during 2027 through 2035. If John died on or after his RBD, Lisa must take annual beneficiary RMDs during those years and still fully distribute the account by December 31, 2036.