Inheriting an IRA From a Parent: The 10-Year Rule and a Physician's Tax Bracket

The phone call comes, and then the paperwork does. Somewhere in the weeks after a parent dies, a letter arrives from a custodian you've never dealt with, telling you that you're the named beneficiary of an IRA. You're grieving, you're covering call, you're helping your siblings with a dozen logistics, and now there's a retirement account with your name on it and a set of rules you've never had a reason to learn.

"Do I have to do something with this right now?" is usually the first question. The second, for a physician, tends to be sharper: "If I take this money while I'm earning what I earn, how much of it goes to taxes?" That second question is the one we address in this article. It's the beneficiary side of the story, the tax planning you do as the person who inherits, and it connects directly to the years when you may be supporting aging parents while raising kids on a physician income.

We'll walk through how the SECURE Act's 10-year rule works, when annual withdrawals are required inside that window, how an inherited Roth IRA differs from an inherited traditional IRA, and why the timing of withdrawals matters so much for a household already sitting in a high bracket. If you've already been thinking about how Roth conversions fit your 2026 tax picture, a lot of the same thinking applies here. (Questions about your parent's own will, trust, or estate administration belong with an estate attorney, and we won't wade into them.)

How the 10-Year Rule Works for an Adult Child

The SECURE Act replaced life-expectancy payments with a 10-year rule for most beneficiaries of an account owner who died after December 31, 2019. A smaller group, described below, can still use life-expectancy payments.

Under the 10-year rule, the whole inherited account has to be emptied by December 31 of the year that contains the 10th anniversary of the owner's death. IRS Publication 590-B, which covers distributions from IRAs, states it in exactly those terms: the beneficiary must withdraw the entire balance "by December 31 of the year containing the 10th anniversary of the owner's death." So if your parent died in March 2026, the account needs to be fully distributed by December 31, 2036.

The rule doesn't apply to everyone. The law carves out a group called eligible designated beneficiaries (people who can still use some version of the old life-expectancy stretch). That group includes a surviving spouse, the account owner's minor child (until they reach the age of majority), a beneficiary who is disabled or chronically ill, and a beneficiary who is not more than 10 years younger than the owner. The IRS required minimum distribution FAQs list the same exceptions.

If you're an adult child more than 10 years younger than your parent, and you aren't disabled or chronically ill, you're not an eligible designated beneficiary, so the 10-year clock applies to you.

A few mechanics come along with that status. As a non-spouse beneficiary, you can't treat the inherited IRA as your own. You can't add contributions to it, and you can't roll money into or out of it. What you can do is move it by trustee-to-trustee transfer into an inherited IRA titled in your parent's name for your benefit.

Here's how the main beneficiary categories line up, based on Publication 590-B and the final regulations:

When Annual Withdrawals Are Required Inside the 10 Years

For a few years after the SECURE Act passed, there was real confusion about whether a non-eligible beneficiary had to take anything out in years one through nine, or could simply wait and empty the account in year 10. The IRS settled it in final required minimum distribution regulations published in July 2024.

The answer turns on one date: your parent's required beginning date, or RBD (the deadline for starting their own RMDs, which are the IRS-mandated annual withdrawals from traditional retirement accounts). For people currently reaching that stage, the RBD is April 1 of the year after they turn 73.

• If your parent died before their RBD, you have no annual withdrawal requirement during the 10 years. The only hard deadline is the end of year 10, so you have flexibility in when you take money out.
• If your parent died on or after their RBD, annual RMDs continue. You take a required amount in each of years one through nine, calculated using a life-expectancy table in Publication 590-B, and whatever is left must come out by the end of year 10. Alternatively, you could take the full amount out in years 1 through 9, as long as the RMD was made in each year before the account is emptied.

There's also the year of death itself. If your parent had already started RMDs and hadn't taken the full amount for the year they died, that remaining distribution still needs to come out.

Because the rule was unsettled for several years, the IRS announced relief from the excise tax for certain missed annual distributions. For beneficiaries of owners who died in 2020 through 2023 on or after their required beginning date, IRS Notice 2024-35 says the IRS will not assert the excise tax for a missed 2024 annual distribution, building on earlier notices that covered 2021 through 2023. The notice also says the final regulations apply for determining RMDs for calendar years beginning on or after January 1, 2025. For any year after the owner's death, the annual amount must be taken by December 31.

Missing a required distribution isn't trivial. The excise tax is 25% of the amount that should have come out, reduced to 10% if the shortfall is corrected in a timely way. It helps to know early whether your inherited account is a "must take something annually" account or a "deadline only" account.

Inherited Roth IRA vs. Inherited Traditional IRA

The 10-year rule applies to both kinds of IRA, but the tax experience is very different. Here's how each one tends to work for an adult child.

Inherited traditional IRA

Publication 590-B says distributions from a traditional IRA are taxed as ordinary income, so every dollar you withdraw is generally taxed in the year you take it, added on top of your salary, bonuses, and any 1099 income. If your parent made nondeductible contributions, not all of a distribution is taxable. Publication 590-B notes that, unless you're the surviving spouse treating the account as your own, you can't combine your parent's basis (those nondeductible contributions) with any basis in your own traditional IRAs.

Publication 590-B also says a non-spouse beneficiary can't roll over any amount out of an inherited IRA, so the tax planning happens through when and how much you withdraw.

Inherited Roth IRA

For required minimum distribution purposes, Publication 590-B treats a Roth IRA owner as if they died before their required beginning date. In practice, that means an inherited Roth IRA has no annual withdrawal requirement for a non-eligible beneficiary. The account still has to be emptied by the end of year 10.

A qualified Roth distribution, including one made to a beneficiary after the owner's death, is not included in gross income. To be qualified under Publication 590-B, it must come after the 5-year period that begins with the first tax year for which a contribution was made to a Roth IRA set up for the owner. If that period hadn't run when your parent died, part of a withdrawal may be taxable, so it's worth confirming with your CPA.

Because qualified withdrawals from an inherited Roth are not included in your gross income, the timing question looks different. Some beneficiaries consider leaving the inherited Roth untouched until late in the 10-year window, keeping the balance invested longer (it can rise or fall), then withdrawing it near the deadline. Others take it earlier because the money serves a near-term family purpose.

Why Your Tax Bracket Changes the Whole Picture

Here's where being a physician can make this harder. Withdrawals from an inherited traditional IRA are taxed as ordinary income and added on top of your salary, so for a household already earning a high income, the added dollars may land in higher brackets.

Consider a hypothetical. You inherit a $500,000 traditional IRA, and you're already earning a high income. If you withdraw the entire balance in one year, the whole $500,000 is added to that income on a single tax return. If instead the balance is spread over the 10 years, each year's withdrawal still adds to your income, but far less of it is stacked on top of everything else in a single return.

Spreading has a limit, though. If your income stays high every year for the next decade, spreading withdrawals across those years mostly keeps you from stacking everything into one tax return; each year's share still lands on top of a high income.

Side effects of a higher-income year

A large withdrawal raises your adjusted gross income (AGI), and for a physician household that can affect more than your bracket.

One example is the net investment income tax. A higher-income year raises your modified adjusted gross income, which is the figure compared against the statutory threshold for that 3.8% tax.

How Lower-Income Years Fit Into a 10-Year Window

Ten years is a long stretch in a physician's career. A lot can change, and some of those changes create years when your taxable income drops. When your inherited account allows flexible timing, those years are often where planning conversations focus.

Here are some of the lower-income years that come up for physician households:

• Going part-time. If you're considering cutting back to 0.8 FTE or less, the drop in salary may open room in lower brackets for inherited IRA withdrawals.
• A sabbatical or gap between jobs. A planned break, a few unpaid months between positions, or a year spent relocating can all produce a lighter tax return.
• Parental leave or a spouse stepping back. A year when one income drops for family reasons may change the household's bracket.
• Early retirement. If your inheritance arrives in your late 50s, the years between your last paycheck and the start of Social Security and your own RMDs may be the lowest-income years you've had since training. That window often shows up in the five years before you stop working.

There's a trade-off in waiting. Holding an inherited traditional IRA longer means a larger balance may need to come out in the final years, and if your expected lower-income year never happens (a planned sabbatical gets postponed, or you decide to keep working full-time), you could end up with more income bunched into years nine and ten. That's why some beneficiaries look at a blend: steady withdrawals in working years and larger ones in lighter years, revisited each fall when the year's income is clearer.

If your parent died after their RBD, the annual RMDs set a floor. You have to take at least that amount each year, and you can always take more. The flexibility is in how much above the minimum to withdraw, and when.

How an Inherited IRA Interacts With Your Other Planning

If you contribute to a backdoor Roth each year, you may wonder how an inherited traditional IRA fits with the pro-rata calculation (the rule that blends pre-tax and after-tax IRA dollars when you convert). Our article on backdoor Roth pitfalls and the pro-rata rule walks through the mechanics, and it's worth asking your CPA how the inherited account is treated in your situation.

Then there's the question of what the withdrawn money does next. After taxes, inherited IRA dollars might fund 529 accounts, a taxable brokerage account, paying down debt, or help with a sibling or a surviving parent's needs. Since you can't contribute to an inherited IRA, the tax shelter itself ends when money comes out. Some households use withdrawals to cover living expenses so more of their own salary can go into their workplace retirement plan, which is one way the inherited money and your own savings plan connect.

On the practical side, a few details tend to matter early. The IRS page on required minimum distributions for IRA beneficiaries is a useful reference as you sort through them:

• Confirm the account type. Is it a traditional IRA, a Roth IRA, or an employer plan like a 401(k) or 403(b)? Employer plans are also subject to the section 401(a)(9) distribution rules.
• Confirm whether your parent had reached their RBD. That one fact decides whether you have annual RMDs.
• Check whether a year-of-death RMD was taken.
• Keep the inherited IRA titling. Publication 590-B allows moving the money by trustee-to-trustee transfer into an IRA set up in the decedent's name for your benefit, and rolling money into or out of an inherited IRA isn't allowed.

A Worked Example: Two Inherited Accounts

Picture a hospitalist in her late 40s who inherits two accounts from her father: a traditional IRA and a smaller Roth IRA. Her father was 78 and had been taking RMDs for years, so the traditional IRA comes with annual required withdrawals. She and her husband expect to keep working full-time for at least six more years, and they've talked about her dropping to part-time once their youngest finishes high school.

In a situation like this, the conversation with an advisor and CPA usually covers how much to take above the annual minimum in her full-time years, how much room a part-time year might open up in lower brackets, what happens if the part-time plan slips, and whether the Roth should sit until near the deadline or be used sooner. None of those answers are fixed. They get revisited each year as income, family needs, and tax law move.

There's an emotional side, too. This money came from your mom or dad, and it can feel strange to treat it as a line item in a tax projection. It's fine to take time before making decisions, as long as you know which deadlines apply. If your parent died after their RBD, the annual RMD is the one deadline that doesn't wait.

Getting Help With the Timing

An inherited IRA from a parent is often both a gift and a tax decision spread across a decade. The rules themselves are knowable: who is subject to the 10-year rule, whether annual RMDs apply, and how inherited Roth and traditional accounts differ. Applying them to a physician household, with its high income, shifting career plans, student loans, and family priorities, is where the details add up.

If you've inherited an account and you'd like to talk through how it fits into your household's bigger picture, our CFP® professionals would be glad to start with a conversation. You can schedule an introductory call or email contact@physicianfamily.com, and we'll begin by learning what matters to your family.

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