For decades, one of the most powerful estate planning tools available was what advisors called the “stretch IRA.” When you left a retirement account to a non-spouse beneficiary — a child or grandchild, for example — that person could take distributions over their own life expectancy. A 30-year-old inheriting a sizable IRA could spread withdrawals over several decades, keeping the money growing tax-deferred and managing the tax hit carefully.
That strategy is largely gone, and the rules are now fully settled. Here is what Maryland families with retirement savings need to understand.
The Law That Changed Everything
The Setting Every Community Up for Retirement Enhancement Act — the SECURE Act — was signed into law in December 2019. Among its most significant provisions: the elimination of the stretch IRA for most non-spouse beneficiaries. In its place, Congress established what is now known as the 10-year rule, requiring most heirs who inherit a retirement account to fully deplete it within ten years of the original owner’s death.
After the SECURE Act passed, significant uncertainty remained about exactly how the 10-year rule worked — particularly whether beneficiaries had to take distributions each year during that period or could simply wait and withdraw everything in year ten. The IRS issued proposed regulations in 2022 that muddied the waters further, and practitioners and account holders spent years waiting for a definitive answer.
Treasury Decision 10001: The Final Word
That answer arrived on July 19, 2024, when the Treasury Department and the IRS published Treasury Decision 10001 — 260 pages of final regulations governing required minimum distributions from inherited retirement accounts. T.D. 10001 resolved the central question that had generated so much confusion: whether annual distributions are required during the 10-year window, or whether an heir can hold the account and take a single lump sum at the end.
The answer depends on one key fact: whether the original account owner had already begun taking required minimum distributions before they died.
If the owner died before their required beginning date for RMDs, the beneficiary has full flexibility. They can take distributions in any pattern they choose — annually, irregularly, or all at once in year ten — as long as the account is fully depleted by the end of the tenth year after death.
If the owner died on or after their required beginning date — meaning they had already started taking RMDs — the heir must take annual distributions throughout the 10-year period, not just a lump sum at the end. This is the rule that caught many families off guard, and T.D. 10001 confirmed it without modification.
As a practical matter, the annual distribution requirement under T.D. 10001 took effect beginning in 2025. The IRS had issued a series of penalty waivers covering 2021 through 2024 while the regulations were being finalized, so beneficiaries who did not take distributions during those years owe no penalties for those missed amounts. But the clock has not stopped — the 10-year period still runs from the year after the original owner’s death, and the account must still be empty by the end of that window regardless of when distributions begin.
Who Is — and Isn’t — Affected
Surviving spouses are not subject to the 10-year rule and retain considerably more flexibility, including the ability to roll the inherited account into their own IRA and defer distributions accordingly. T.D. 10001 also introduced new options for surviving spouses that allow them to choose between treating the inherited account as their own or as a beneficiary account, depending on which produces a more favorable outcome.
A narrow category of “eligible designated beneficiaries” also operates under different rules. This group includes minor children of the account owner (though not grandchildren), individuals who are disabled or chronically ill, and beneficiaries who are not more than ten years younger than the original owner. Everyone else — most adult children, siblings, and other heirs — falls under the 10-year rule as clarified by T.D. 10001.
If you are a Maryland resident with a meaningful IRA or 401(k), it is worth asking: does your current estate plan account for these rules? A plan written before 2020 almost certainly does not, and a plan written between 2020 and mid-2024 may reflect the uncertainty that existed before the final regulations were published.
What You Can Do
There is no way to fully avoid the taxation of inherited retirement accounts, but there are ways to plan around the new rules thoughtfully. Some families use Roth conversions during their lifetime to shift money from tax-deferred to tax-free accounts, so that beneficiaries inherit a Roth IRA rather than a traditional one — the 10-year depletion rule still applies to inherited Roth IRAs, but distributions come out tax-free. Others use life insurance as a more tax-efficient way to transfer wealth, funding the policy with dollars that would otherwise have gone toward future RMDs. Still others factor the expected tax impact into how they allocate assets among heirs, directing retirement accounts to lower-income beneficiaries and other assets to those in higher brackets.
None of these strategies works in isolation, and none can be properly evaluated without understanding the full picture of your estate. The regulations governing this area are detailed and, as T.D. 10001 itself demonstrates, subject to change. If you have meaningful retirement savings and your plan hasn’t been reviewed with these rules in mind, now is a good time to take a closer look.
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