Does Inheritance Affect RMDs
Jason Stolz CLTC, CRPC
Does inheritance affect Required Minimum Distributions (RMDs)? Yes—but the impact depends heavily on what type of account you inherit, your relationship to the original owner, and whether you inherit before or after they started taking RMDs. Some inheritances trigger immediate withdrawal requirements, others come with strict timelines, and some are exempt entirely. Understanding how inheritance affects RMDs can help you avoid unnecessary taxes, penalties, and costly mistakes.
At Diversified Insurance Brokers, we help retirees and beneficiaries understand the rules surrounding inherited accounts, income planning, annuity options, and tax-efficient strategies. This guide breaks down how inheritance affects RMDs across different account types, how spousal and non-spousal beneficiaries differ, and how tools like annuities, income planning, and strategic withdrawals can help you avoid penalties and protect your long-term retirement plan.
Does Inheriting an Account Trigger RMDs?
Whether inheritance affects RMDs depends on the type of asset. Here is the general framework:
- Traditional IRAs: Inherited traditional IRAs almost always require RMDs under IRS rules.
- Roth IRAs: Roth IRAs do not require RMDs during the original owner’s lifetime, but beneficiaries often must take withdrawals after inheritance.
- 401k, 403b, 457b, TSP, and similar plans: These typically require RMDs after inheritance unless moved into an inherited IRA.
- Annuities: Tax-deferred annuities may trigger structured payout requirements depending on the contract.
- Taxable accounts: These do not have RMDs, especially because they receive a step up in cost basis.
The rules you face depend on whether you are a spouse, a non-spouse, a minor, or an eligible designated beneficiary. Because penalties for incorrect RMD handling can be steep, understanding these distinctions is critical.
Inheritance and RMDs for Traditional IRAs
Traditional IRA beneficiaries are usually required to take withdrawals after inheritance, though the timeline varies.
Spousal Beneficiaries
Spouses have the greatest flexibility when inheriting a traditional IRA. Options may include:
- Treating the IRA as your own (delaying RMDs until your required age)
- Rolling into your own IRA
- Keeping it as an inherited IRA and taking RMDs based on your age
This flexibility lets spouses integrate the inherited IRA into their broader retirement strategy, especially when planning RMD timing, taxes, and income needs.
Non-Spousal Beneficiaries
Most non-spousal beneficiaries must withdraw the entire inherited IRA within 10 years. Some must also take annual RMDs during those 10 years if the original owner had already begun RMDs.
These forced withdrawals can create significant tax burdens, especially for high-income earners or beneficiaries inheriting large IRAs.
Many beneficiaries use fixed annuities or bonus annuities to reinvest inherited IRA funds for guaranteed income once distributions are taken. This helps prevent destabilizing income spikes and preserves long-term retirement stability.
Inheritance and RMDs for Roth IRAs
Roth IRAs are not subject to RMDs for the original owner, but beneficiaries often must follow a withdrawal timeline after inheritance.
- Spouses may treat the Roth as their own—no RMDs.
- Non-spouses typically must withdraw the account within 10 years, but withdrawals are tax-free if the 5-year rule is met.
Because withdrawals are tax-free, many beneficiaries coordinate Roth withdrawals strategically with annuity income, Social Security, and taxable assets for more efficient long-term planning.
Inheritance and RMDs for a 401k, 403b, 457b, TSP, or Pension
Employer plans have similar RMD rules to IRAs, but with less flexibility. Many beneficiaries choose to roll inherited employer plans into an inherited IRA for more control.
You can review how each account works here:
Employer plan RMDs can be high due to limited flexibility. Rolling funds into an inherited IRA often allows for better withdrawal timing and integration with annuity income strategies.
You can review the rollover process here: How to Transfer an Inherited IRA to an Annuity.
How Inheritance Affects RMDs for Non-Retirement Assets
Not all inherited assets come with RMD complications.
- Life insurance death benefits are tax-free and have no RMDs.
- Annuity contracts may require structured payouts depending on the policy.
- Brokerage accounts receive a step up in cost basis and no RMDs apply.
- Real estate also receives a step up in cost basis, eliminating much of the capital gain.
Because these assets avoid RMD rules, retirees often use them strategically within legacy plans to preserve maximum value for heirs.
Using Annuities to Offset Inherited RMD Taxes
Inherited RMDs can spike your income, create tax pressure, or push you into a higher bracket. One strategy many beneficiaries use is shifting RMD withdrawals into a fixed annuity or bonus annuity to create predictable future income and stabilize cash flow.
This also helps beneficiaries avoid spending down inherited funds too quickly.
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Beneficiaries often underestimate how inherited RMDs may affect:
- Social Security taxation
- Medicare IRMAA surcharges
- Bracket management
- The timing of withdrawals from taxable and tax-free accounts
Strategic planning helps coordinate these elements while reducing the impact of forced withdrawals.
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FAQs: Does Inheritance Affect RMDs?
Do inherited IRAs require RMDs?
Yes. Most inherited traditional IRAs require beneficiaries to take withdrawals, often under a 10-year rule.
Do Roth IRAs have RMDs for beneficiaries?
Spouses have no RMDs. Most non-spousal beneficiaries must withdraw the inherited Roth within 10 years, but withdrawals are tax-free.
Do inherited employer plans require RMDs?
Yes. Inherited 401k, 403b, 457b, and TSP plans generally require withdrawals unless rolled to an inherited IRA.
Do taxable accounts have RMDs?
No. Taxable brokerage accounts receive a step up in basis and do not require RMDs.
How do inherited RMDs affect taxes?
Inherited RMDs can increase taxable income. Many beneficiaries use annuities to stabilize income after taking required withdrawals.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
