For many families, a traditional IRA or 401(k) represents decades of careful saving — often the single largest asset in an estate. Yet when clients ask what will happen to those accounts after they die, many are surprised to learn just how much the rules have changed in recent years.
Two pieces of federal legislation — the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) and its follow-up, SECURE 2.0 of 2022 — fundamentally rewrote the estate planning landscape for retirement accounts. Final Treasury Regulations issued in July 2024 resolved many remaining questions and confirmed how the new rules apply in practice. If you have not reviewed your retirement account beneficiary designations and overall estate plan since 2019,
there is a good chance your plan no longer works the way you intended.
The old rules: The "Stretch IRA"
Before the SECURE Act, the law allowed a non-spouse beneficiary who inherited an IRA to spread required distributions over his or her own life expectancy. A 40-year-old child who inherited a parent's $500,000 IRA, for example, might stretch those distributions over 40 or more years — letting the bulk of the account continue growing tax-deferred while only modest required minimum distributions (RMDs) were taken each year. This was known as the "stretch IRA," and it was one of the most powerful wealth-transfer tools available to families with significant retirement account
balances.
What the SECURE Act changed
The SECURE Act eliminated the life expectancy payout for most non-spouse beneficiaries. In its place, Congress imposed a ten-year rule: most beneficiaries who inherit a retirement account from someone who died after December 31, 2019 must withdraw the entire account balance by the end of the tenth calendar year following the year of the account owner's death.
But here is where the rules became unexpectedly complicated. Whether the account owner died before or after his or her Required Beginning Date (RBD) — the date by which lifetime RMDs were required to start — dramatically affects how the ten-year rule operates.
THE TEN-YEAR RULE — TWO VERY DIFFERENT VERSIONS
Owner died before the RBD: No annual distributions are required during years one through nine. The beneficiary can leave the entire account untouched for nine years and then withdraw 100% in year ten. There may be planning opportunity here, but a large tax bill concentrated in year ten if distributions are not managed carefully.
Owner died on or after the RBD: Annual distributions are required in each of the first nine years (calculated using the beneficiary's life expectancy), and the account must be fully distributed by the end of year ten regardless. This is significantly more burdensome — and many beneficiaries were unaware of these annual requirements until IRS guidance clarified the rules.
This distinction matters enormously in planning. An account owner who dies even one day after his or her RBD imposes a much more demanding distribution schedule on beneficiaries than an owner who dies one day before it.
Who gets to skip the ten-year rule
Congress carved out a narrow category of beneficiaries — called "Eligible Designated Beneficiaries," or EDBs — who are still permitted to take distributions over their own life expectancy rather than emptying the account within ten years. If you are planning your estate, who you name as beneficiary determines which rules apply.
ELIGIBLE DESIGNATED BENEFICIARIES (EDBS)
These individuals may still use a life expectancy payout:
Your surviving spouse. A surviving spouse has unique options unavailable to any other beneficiary, including the ability to roll the inherited IRA into his or her own IRA entirely and defer distributions as though the account were always theirs.
A disabled individual. Must meet the IRS definition of disability under IRC §72(m)(7).
A chronically ill individual. Must meet the definition in IRC § 7702B(c)(2).
A minor child of the account owner. Important limitation: once the child reaches majority (age 21 under the Treasury Regulations), the ten-year clock starts. Life expectancy payouts do not extend through adulthood.
Someone not more than ten years younger than the account owner. Often called the "NoMoTTYY" category — a sibling, close friend, or partner who is close in age qualifies here.
Everyone else — adult children, grandchildren, most trusts, charities — is subject to the ten-year rule. For many families, this means the tax deferral their parents worked decades to build will be compressed into a ten-year window, often during the beneficiaries' peak earning years.
A note on surviving spouses
The surviving spouse received significant new benefits under SECURE 2.0, which took effect in 2024 and later years. A surviving spouse who is the sole beneficiary of a retirement account is now treated more favorably than before: his or her required minimum distributions are calculated using the Uniform Lifetime Table (a joint life expectancy table) rather than the Single Life Table, producing smaller annual RMDs. This is a meaningful change that reduces the distribution burden on many surviving spouses.
When must you begin taking distributions during your lifetime?
The SECURE Act and SECURE 2.0 also changed when the account owner must begin taking required minimum distributions during his or her own lifetime. The age at which RMDs must begin — called the "Applicable Age" — now depends on your birth year:
BIRTH YEAR | RMD MUST BEGIN AT AGE |
|---|---|
Before July 1, 1949 | 70½ |
July 1, 1949 - December 31, 1950 | 72 |
1951 - 1959 | 73 |
1960 or later | 75 |
If you were born in 1951 or later and have not yet reached your applicable age, you have more time than you may realize before lifetime RMDs are required — and that window creates planning opportunities worth discussing with your attorney and financial advisor.
IMPORTANT: PENALTY RELIEF HAS ENDED
The IRS issued notices in 2022, 2023, and 2024 waiving the 25% excise tax penalty for beneficiaries who missed certain required distributions under the new rules while the regulations were being finalized. That relief ended as of 2025. Beneficiaries who inherited retirement accounts from post-2019 decedents and have not been taking required annual distributions should address this promptly.
The trust problem
Many clients named a revocable living trust as the beneficiary of their IRA — sometimes because their attorney told them to, sometimes because they thought it would provide more control over distributions. The SECURE Act made this significantly more complicated, and in some cases more costly, for beneficiaries.
A trust named as IRA beneficiary must meet complex requirements to qualify as a "see-through trust" under the Treasury Regulations — allowing the IRS to look through the trust to its individual beneficiaries and determine which distribution rules apply. Even when a trust qualifies, the planning outcome depends heavily on whether the trust is structured as a "conduit trust" (which passes distributions out to beneficiaries immediately) or an "accumulation trust" (which may hold distributions inside the trust). Each type involves different trade-offs under the new rules.
If your estate plan names a trust as the beneficiary of any retirement account, and that plan was drafted before 2020, it almost certainly warrants a careful review. The rules that applied when many of these documents were drafted no longer exist in the same form.
Roth IRAs: A different story
One important exception worth noting: Roth IRAs have no required minimum distributions during the original owner's lifetime, because there is no Required Beginning Date for a Roth IRA. For purposes of the post-death rules, this means a Roth IRA owner's death is always treated as occurring before the RBD — which is favorable for beneficiaries subject to the ten-year rule, since it means no annual distributions are required during years one through nine. The account just needs to be emptied by the end of year ten. For the right client, a Roth conversion strategy deserves serious consideration in light of the current rules.
What you should do now
The changes made by the SECURE Act, SECURE 2.0, and the 2024 Final Regulations are not abstract planning concerns. They have concrete implications for real families, and the gap between what many existing estate plans contemplate and what the current law actually provides can be significant. Here are the most important steps to take:
ACTION ITEMS
Review every beneficiary designation form. Your will and trust do not control your IRA or 401(k). The beneficiary designation form on file with your plan administrator does — and it controls even if it conflicts with your estate plan documents. Pull your current forms and confirm they reflect your current wishes.
Consider whether a trust should be named as beneficiary. For some clients, naming a trust still makes sense — for asset protection, control over distributions, or special needs planning. For others, it now creates unnecessary complexity and tax cost. The right answer depends on your specific family situation.
Think about your beneficiaries' tax situations. The ten-year rule compresses what was once a lifetime of distributions into a decade. If your intended beneficiaries will be in high tax brackets during those years, the timing of distributions becomes a critical planning consideration.
Revisit Roth conversion planning. Paying taxes now, at potentially favorable rates, in exchange for leaving beneficiaries a tax-free account they can hold for ten years may be advantageous for some clients.
Do not ignore the annual distribution requirement. If you inherited a retirement account from someone who died on or after his or her required beginning date, you are likely required to take annual distributions in years one through nine — not just a lump sum at the end of year ten.
Retirement accounts are one of the most tax-sensitive assets you can leave to your family, and the rules that govern them have never been more complicated. A plan drafted before 2020 almost certainly needs to be revisited. An attorney who understands both estate planning and the underlying tax rules can help you make choices that protect your family and make the most of what you have built.
To schedule a consultation with N. Davis Law, LLC, contact us at [email protected].
Contributor Natasha Davis-Patton, JD, LLM (Taxation), MBA of N. Davis Law, LLC practices law in Oro Valley, AZ.
This article is provided for general informational purposes only and does not constitute legal or tax advice. Reading this article does not create an attorney-client relationship. The rules discussed are based on federal law as in effect as of the date of publication; individual circumstances vary significantly and the application of these rules to your situation requires a review of your specific facts. Please consult a qualified estate planning attorney before making decisions about your retirement accounts or beneficiary designations.
