{"id":2252,"date":"2025-10-24T15:54:46","date_gmt":"2025-10-24T15:54:46","guid":{"rendered":"https:\/\/www.finznest.com\/blog\/inherited-iras-have-a-key-withdrawal-change-for-2025-what-to-know\/"},"modified":"2025-10-24T15:54:46","modified_gmt":"2025-10-24T15:54:46","slug":"inherited-iras-have-a-key-withdrawal-change-for-2025-what-to-know","status":"publish","type":"post","link":"https:\/\/www.finznest.com\/blog\/inherited-iras-have-a-key-withdrawal-change-for-2025-what-to-know\/","title":{"rendered":"Inherited IRAs have a key withdrawal change for 2025. What to know"},"content":{"rendered":"
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If you inherited an individual retirement account, there is a key change for 2025 that \u2014 without action on your part before year-end \u2014 could trigger an IRS penalty.<\/p>\n

Starting in 2025, certain non-spouse heirs, including adult children, must start taking required minimum distributions, or RMDs, while emptying their inherited IRA over 10 years, according to IRS regulations released in 2024.\u00a0 \u00a0<\/p>\n

The change comes as investors prepare for the “great wealth transfer,” with more than $100 trillion expected to flow to heirs through 2048, according to a December report from Cerulli Associates. Much of that wealth will eventually move from parents to adult children, and tax planning for that windfall will be important, experts say.<\/p>\n<\/div>\n

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More from Financial Advisor Playbook:<\/h2>\n
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Here’s a look at other stories affecting the financial advisor business.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Some heirs should consider depleting accounts sooner than the IRS requires, depending on their tax situation, experts say.<\/p>\n

Here are the key things to know about the 2025 change and how to avoid an IRS penalty.<\/p>\n<\/div>\n

Who must take RMDs for 2025<\/h2>\n
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Since 2020, certain inherited accounts are subject to the “10-year rule,” which means heirs must deplete the balance by the 10th year after the original account owner’s death.\u00a0\u00a0\u00a0\u00a0<\/p>\n

The “10-year rule” and new RMD requirement apply to most non-spouse beneficiaries, such as adult children, if the original IRA owner reached RMD age before their death.\u00a0<\/p>\n

“Most of our clients fall into that 10-year window,” and they have faced “years of ambiguity” about RMDs, said certified financial planner Kristin McKenna, president of Darrow Wealth Management in Needham, Massachusetts.<\/p>\n<\/div>\n

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Before the IRS released guidance last year, it was unclear whether yearly RMDs were required during the 10-year drawdown. As a result, the agency waived penalties for multiple years\u00a0for missed RMDs on inherited IRAs.<\/p>\n

But starting in 2025, specific heirs must start annual RMDs or could face a 25% penalty on the amount they should have withdrawn.\u00a0<\/p>\n

It’s possible to reduce that fee to 10% by withdrawing the right RMD within two years and filing Form 5329. In some cases, the agency will waive the penalty entirely.<\/p>\n

“A lot of clients are getting that excise tax waived” by correcting the RMD, filling out the form and providing a “reasonable explanation,” IRA expert Denise Appleby, CEO of Appleby Retirement Consulting, previously told CNBC.<\/p>\n<\/div>\n

Play the ‘income tax bracket game’<\/h2>\n
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Even if RMDs don’t apply to your inherited IRA for 2025, most heirs still must deplete the balance within 10 years. That could require planning to avoid a giant tax hit in the final year, experts say.<\/p>\n

For example, you can “play the income tax bracket game,” by taking withdrawals sooner during lower-earning years, said CFP Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida. She is a member of CNBC’s Financial Advisor Council.<\/p>\n

“There might be room to fill up the lower brackets,” when income is temporarily lower, said Collado, who is also a certified public accountant.<\/p>\n

However, you also have to consider the tax consequences of increasing income, such as phasing out tax breaks enacted via President Donald Trump’s “big beautiful bill.”<\/p>\n

“There are so many things to think about” when timing inherited IRA withdrawals, said McKenna from Darrow Wealth Management. “It requires a very thoughtful analysis.”<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

If you inherited an individual retirement account, there is a key change for 2025 that \u2014 without action on your part before year-end \u2014 could trigger an IRS penalty. Starting in 2025, certain non-spouse heirs, including adult children, must start taking required minimum distributions, or RMDs, while emptying their inherited IRA over 10 years, according […]<\/p>\n","protected":false},"author":1,"featured_media":2253,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[368,1311,1312,399,1313],"class_list":["post-2252","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-change","tag-inherited","tag-iras","tag-key","tag-withdrawal"],"_links":{"self":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts\/2252","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/comments?post=2252"}],"version-history":[{"count":0,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/posts\/2252\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/media\/2253"}],"wp:attachment":[{"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/media?parent=2252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/categories?post=2252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finznest.com\/blog\/wp-json\/wp\/v2\/tags?post=2252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}