Inherited IRAs After SECURE Act 2.0: What New Hampshire Beneficiaries Need to Know

On Behalf of Sowerby & Moustakis Law

Quick Summary

Inherited IRA rules changed significantly after the SECURE Act and SECURE 2.0, and many beneficiaries still assume the old “stretch IRA” rules apply to everyone. They do not. For many non-spouse beneficiaries, the account now must be emptied within ten years, while surviving spouses and certain other eligible designated beneficiaries may have more flexible options. This article explains the big categories New Hampshire families should understand before year-end planning decisions are made.

If you inherited an IRA and someone told you to “just stretch it over your lifetime,” that advice may be out of date.

That is one of the biggest year-end planning traps in this area.

Inherited IRAs still create planning opportunities, but the rules now depend heavily on who inherited the account, when the original owner died, and whether the owner had already reached the required beginning date for minimum distributions.

The Old Shortcut No Longer Works For Many Families

For years, many beneficiaries expected to take inherited IRA distributions slowly over life expectancy.

For many non-spouse beneficiaries of owners who died after 2019, that is no longer the general rule. IRS guidance explains that the SECURE Act requires the entire balance to be distributed within ten years, subject to important exceptions for certain eligible designated beneficiaries.

That does not mean every beneficiary follows the same calendar. It means the first question is no longer “How old is the beneficiary?” The first question is “What kind of beneficiary is this under the current rules?”

For general planning background, see the Sowerby & Moustakis Law page on estate planning.

Who Usually Falls Under The 10-Year Rule?

Many adult children, other individual heirs, and similar non-spouse beneficiaries now fall under the 10-year payout framework.

In broad terms, that means the inherited IRA must be fully distributed by December 31 of the year containing the tenth anniversary of the owner’s death.

That rule changes the planning conversation because the beneficiary may need to think about:

• Income-tax bunching
• Whether to spread distributions across multiple years
• Whether large withdrawals will affect brackets or Medicare-related costs
• Whether the account is traditional or Roth
• Whether the owner died before or after the required beginning date

The account may still be a useful planning asset, but it usually is not the old lifetime-stretch asset many families remember.

Who Gets More Flexible Treatment?

IRS materials identify several categories of eligible designated beneficiaries who may have different options than a typical adult-child beneficiary.

Those categories include:

• A surviving spouse
• The owner’s minor child
• A disabled beneficiary
• A chronically ill beneficiary
• A beneficiary who is not more than ten years younger than the account owner

Each category has its own planning details. The important point is that “beneficiary” is not one single tax category anymore.

Surviving Spouses Usually Have The Most Options

A surviving spouse is in a very different position from most other beneficiaries.

IRS Publication 590-B explains that a surviving spouse who is the sole designated beneficiary of the IRA can elect to treat the IRA as the spouse’s own. In some situations, a spouse may instead remain a beneficiary and follow a different distribution path.

That distinction matters because the right approach can depend on age, cash-flow needs, the decedent’s age, and whether the spouse wants to delay distributions as long as possible.

A spouse who needs access sooner may think about the account differently than a spouse focused on long-range tax deferral.

Adult Children Often Need A Distribution Calendar, Not Just A Tax Opinion

Many inherited IRA mistakes happen because the beneficiary understands the headline but not the calendar.

For an adult child or other non-spouse beneficiary, the account may need to be fully distributed within ten years. Depending on the facts, annual required minimum distributions may also matter before year ten, especially when the owner died on or after the required beginning date.

That is why families should avoid over-simplified advice such as:

• “Just wait until year ten.”
• “Just take ten equal payments.”
• “Just roll it into your own IRA.”

Those answers may be wrong for the beneficiary’s status, the account type, or the owner’s distribution stage at death.

If the beneficiary is also trying to settle an estate or trust, it can help to review the broader administration picture as well. See the Sowerby & Moustakis Law page on probate and trust administration.

Roth Inherited IRAs Still Need Attention

Families sometimes hear “Roth” and assume there is no urgency.

While Roth IRA distributions to beneficiaries are often income-tax-free if the holding-period rules are met, beneficiary distribution rules still apply after the owner’s death. The timing rules and beneficiary categories still matter even when the tax treatment is different from a traditional IRA.

That makes inherited Roth accounts easier in some ways, but not something to ignore.

Beneficiary Designations Still Drive The Result

A well-drafted will does not override a retirement-account beneficiary designation.

That is why inherited IRA problems often begin before the death. A parent has an outdated beneficiary form, no contingent beneficiary, or a plan that no longer fits the family structure. Then the post-death tax rules become harder to manage because the wrong person or the wrong entity inherited the account in the first place.

If your broader estate plan may be stale, you may also want to review the firm’s case study on an outdated trust leading to years of family conflict.

Year-End Is A Good Time To Check Three Things

If you are a beneficiary, or if you own IRAs and want your family better prepared, year-end is a good time to check:

1. Who Is Actually Named On The Beneficiary Form?

Do not assume the will controls. Confirm the form.

2. What Type Of Beneficiary Would Receive The Account?

Spouse, adult child, trust, estate, and other beneficiary categories can lead to very different outcomes.

3. What Is The Distribution Strategy?

If you already inherited the account, the strategy should account for:

• Whether the account is traditional or Roth
• Whether the owner died before or after the required beginning date
• Whether the beneficiary is an eligible designated beneficiary
• Whether distributions should be spread across years rather than bunched

This is one of those areas where technical tax rules and family planning overlap. The beneficiary wants to preserve value, avoid mistakes, and keep the broader estate plan aligned.

The Practical Takeaway For New Hampshire Families

Inherited IRA rules are no longer simple enough to handle by memory or by relying on advice that was true ten years ago.

If you inherited an IRA, are naming beneficiaries now, or are reviewing your year-end estate and retirement plan, it is worth checking whether the beneficiary category and distribution path still match your goals.

A current beneficiary review can prevent a lot of confusion later.

If you want help reviewing beneficiary designations as part of a larger estate plan, call Sowerby & Moustakis Law at (603) 249-5925, email info@smlpllc.com, or visit our contact page.