Inheriting an ETRADE IRA means navigating the post-SECURE Act distribution rules that now govern most beneficiaries. For the majority of adult non-spouse beneficiaries, the 10-year rule applies: the inherited IRA must be fully distributed by December 31 of the 10th year after the original owner’s death. ETRADE provides broad investment access, no account fees, and Power E*TRADE tools within inherited IRA accounts.
The 10-Year Rule: The Core Rule for Most Beneficiaries
Under the SECURE Act (effective January 1, 2020), most non-spouse beneficiaries who inherit an IRA must withdraw all funds by December 31 of the 10th year following the year of the owner’s death. There are no required annual distributions during years 1–9 unless the decedent had already started required minimum distributions (RMDs).
If the original owner had NOT yet started RMDs (died before their Required Beginning Date):
- Beneficiary can take distributions in any amount, at any time
- Account must be fully distributed by December 31 of the 10th year after death
- Strategy: spread withdrawals across years to manage tax brackets
If the original owner HAD started RMDs (died on or after their Required Beginning Date):
- Beneficiary must take annual RMDs in years 1–9 based on the beneficiary’s own life expectancy
- Account must be fully emptied by December 31 of the 10th year
- This rule was confirmed by IRS final regulations issued in July 2024
The Required Beginning Date is April 1 following the year the original owner turns age 73 (if born 1951–1959) or age 75 (if born 1960 or later) under SECURE 2.0.
Who Can Still Use the Stretch IRA (Eligible Designated Beneficiaries)
Five categories of beneficiaries — called Eligible Designated Beneficiaries (EDBs) — are exempt from the 10-year rule and may instead take distributions over their own life expectancy:
| Eligible Designated Beneficiary | Distribution Rule |
|---|---|
| Surviving spouse | Life expectancy or roll to own IRA |
| Minor child of the decedent | Life expectancy until majority, then 10-year rule |
| Disabled individual (IRS definition) | Life expectancy |
| Chronically ill individual | Life expectancy |
| Person not more than 10 years younger than decedent | Life expectancy |
All other beneficiaries — adult children, siblings, nieces, nephews, friends — must use the 10-year rule.
Surviving Spouse: Three Options
A surviving spouse has the most flexibility of any beneficiary:
- Roll to their own IRA — Treat the inherited IRA as their own; their own RMD rules apply; they can also make new contributions if eligible. Best if the surviving spouse is younger than the deceased.
- Open an inherited IRA — Keep the account as an inherited IRA; use the deceased’s or their own life expectancy to calculate RMDs. Useful if the surviving spouse is under 59½ and needs penalty-free access.
- Life expectancy distributions — Take distributions based on the surviving spouse’s single life expectancy each year.
No 10% Early Withdrawal Penalty
One key benefit of an inherited IRA: there is no 10% early withdrawal penalty, regardless of your age. This applies to both inherited traditional IRAs and inherited Roth IRAs. You will still owe ordinary income tax on distributions from an inherited traditional IRA.
Inherited Roth IRA Rules
The 10-year rule applies to inherited Roth IRAs the same as traditional IRAs — the account must be emptied by the end of the 10th year. However:
- Distributions are generally tax-free if the original Roth IRA was held for at least 5 years
- No annual RMDs required during the 10-year period, even if the decedent was past their RBD (because Roth IRAs have no RMDs for the original owner)
- Strategy: let the Roth account grow tax-free for all 10 years, then take a lump sum in year 10
Inherited IRA Rules: What You Cannot Do
- No contributions — You cannot add money to an inherited IRA
- No rollover to your own IRA — Non-spouse beneficiaries cannot roll an inherited IRA into their own IRA (doing so creates a taxable distribution)
- No conversion to Roth — Non-spouse beneficiaries cannot convert an inherited traditional IRA to a Roth (only surviving spouses who roll to their own IRA can do this)
- Do not combine inherited IRAs from different decedents — keep each inherited IRA separate by decedent
How to Open an E*TRADE Inherited IRA
- Contact E*TRADE — Visit etrade.com or call ETRADE’s estate services line to begin the beneficiary claim. ETRADE routes inherited account requests through its dedicated estate department.
- Submit documentation — Provide the decedent’s death certificate, your government-issued ID, and the original account number.
- Open the inherited IRA — E*TRADE establishes a new account titled: “[Decedent Name], Deceased [Date], IRA FBO [Beneficiary Name].”
- Transfer assets in-kind — Investments transfer from the decedent’s account to the inherited IRA without being sold. You can then manage the positions as you see fit.
- Plan your distributions — E*TRADE’s RMD calculator can help estimate annual required distributions. A tax advisor can model the most efficient 10-year drawdown schedule.
E*TRADE’s Investment Advantage for Inherited IRAs
E*TRADE’s inherited IRA allows access to the full investment platform — unlike Vanguard’s inherited IRA (Vanguard funds only) or accounts at brokers with restricted investment menus:
- Stocks and ETFs — $0 commissions, full market access
- Mutual funds — Thousands of no-load, no-transaction-fee options
- Bonds and CDs — For income-focused beneficiaries
- Options — For qualified inherited IRA accounts via Power E*TRADE
- Prebuilt portfolios — For simpler, hands-off management
This makes E*TRADE particularly useful for beneficiaries who inherit a concentrated stock position or complex portfolio and need flexibility in managing and distributing assets.
Distribution Planning at E*TRADE
No prior RMDs (decedent under Required Beginning Date at death): Withdrawals are flexible in years 1–9. Take larger distributions in years when your income (and therefore tax bracket) is lower. The account must be completely emptied by year 10.
Prior RMDs required (decedent had started RMDs): Take your annual RMD each year in years 1–9 — E*TRADE’s RMD calculator estimates the required amount. Add voluntary distributions in lower-income years to spread the tax burden. Full clearance required by end of year 10.
Inherited Roth IRA: Let the account grow tax-free for all 10 years. Take a full, tax-free distribution in year 10, assuming the original Roth met its 5-year rule.
Related E*TRADE Guides
- E*TRADE Traditional IRA 2026 — Deduction Rules & Limits
- E*TRADE Roth IRA 2026 — Limits, Rules & How to Open
- E*TRADE Backdoor Roth IRA 2026 — Step-by-Step Guide
- E*TRADE SEP-IRA 2026 — Limits, Setup & Comparison
- E*TRADE — Complete Investor Guide 2026
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