Beginning this year, non-spousal beneficiaries of individual retirement accounts must take required minimum distributions annually or may incur a penalty of up to 25 percent of the missed amount. This situation most often applies to adult children who inherited IRAs from their deceased parents—many of whom did not previously take RMDs as the Internal Revenue Service often waived penalties after 2020.
The SECURE Act established that beneficiaries must fully deplete IRAs inherited after 2019 by the end of the 10th year after the original owner’s death. However, new tax law requires that beneficiaries take an RMD every year during that 10-year period. In 2025, this will be strictly enforced.
Penalties can be reduced to 10 percent if remedied quickly and do not apply to ‘Eligible Designated Beneficiaries’ such as spouses, minor children, disabled, or chronically ill dependents.
With just over a month before year-end, it’s important to ensure you’ve taken RMDs from your IRAs in 2025, including those inherited from parents. As a reminder, RMDs are taxed as ordinary income, which means that strategically timing withdrawals in the future can help better manage the tax burden in 2026 and beyond.
Sources:
https://www.kiplinger.com/taxes/inherited-ira-four-things-beneficiaries-should-know
https://www.cnbc.com/2025/10/24/inherited-iras-change-2025.html