What Happens to Your Inherited IRA & Retirement Accounts Account When You Die
Quick Facts
Step-up
NO — fully taxable
Rule
SECURE Act 10-year
Exception
Spouse can rollover
Step-by-Step Guide
No step-up for retirement accounts
IRAs, 401(k)s, 403(b)s, and other pre-tax retirement accounts do NOT receive a step-up in basis. All distributions are taxed as ordinary income to the beneficiary.
Warning: This is the single biggest tax trap for heirs.
SECURE Act 10-year rule
Most non-spouse beneficiaries must withdraw the entire inherited IRA within 10 years of the owner's death. There is no required minimum distribution each year, but the account must be empty by year 10.
Exceptions to the 10-year rule
Eligible designated beneficiaries can still stretch: surviving spouse, minor children (until age of majority), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the decedent.
Spouse has special options
A surviving spouse can roll the inherited IRA into their own IRA, treating it as their own. This is usually the best option — it defers distributions until the spouse's own required beginning date.
Inherited Roth IRA rules
Inherited Roth IRAs are also subject to the 10-year rule, but distributions are tax-free (as long as the 5-year holding period was met). Consider withdrawing Roth last to maximize tax-free growth.
Document Now Checklist
- List all retirement accounts (IRA, 401k, 403b, TSP, etc.)
- Identify named beneficiaries on each account
- Note account custodians and account numbers
- Determine if accounts are Traditional or Roth
- Check if decedent had already begun required minimum distributions
Last verified: June 2026. Platform policies may change. Verify current procedures directly with Inherited IRA & Retirement Accounts. This guide is for informational purposes only and does not constitute legal advice.
Related Guides
Final Income Tax Return (Form 1040)
The final income tax return covers January 1 through the date of death. It must be filed by April 15 of the year after death. Late filing triggers penalties and interest.
Estate Income Tax (Form 1041)
Form 1041 is required if the estate generates more than $600 in gross income during any tax year while it remains open. Income includes interest, dividends, rent, and capital gains earned by estate assets after the date of death.
Estate Tax Return (Form 706)
Even if the estate is below the federal threshold, you may still need to file Form 706 to elect portability — which transfers the unused exemption to the surviving spouse. This election is critical and must be made on a timely filed Form 706.
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