Inheriting a Schwab IRA triggers one of the most complex sets of rules in the US tax code. Most adult non-spouse beneficiaries must follow the 10-year rule: empty the inherited account by December 31 of the 10th year after the original owner’s death. If the original owner had already started required minimum distributions, annual withdrawals are also required in years 1–9. Schwab provides estate services, a dedicated beneficiary team, and an RMD calculator to help you manage the process.
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 a Schwab Inherited IRA
- Contact Schwab’s Estate Services — Call or visit schwab.com to initiate a beneficiary claim. Schwab has a dedicated Beneficiary Distribution Center for inherited account handling.
- Provide required documentation — Submit the original owner’s death certificate, your government-issued ID, and the original account number.
- Establish the inherited IRA — Schwab opens a new account titled in beneficiary form: “[Decedent Name], Deceased [Date], IRA FBO [Your Name].”
- Assets transfer in-kind — Investments move from the decedent’s account to the inherited IRA without being sold, preserving your investment positions.
- Plan distributions — Schwab’s RMD calculator can estimate your required annual distributions. Consider working with a CPA to model tax bracket impacts across the 10-year window.
Inherited IRA Titling at Schwab
Schwab requires the inherited IRA to be titled correctly to reflect the beneficiary relationship. A properly titled account looks like:
[Decedent Name], Deceased [Date], IRA FBO [Beneficiary Name]
Transferring the account to your own name — rather than opening a new inherited IRA — triggers an immediate taxable distribution of the full balance plus the 10% penalty for non-eligible accounts.
Distribution Planning at Schwab
For accounts where the decedent had NOT started RMDs: No annual withdrawal is required in years 1–9. You can take distributions in any amount, in any year, as long as the account is empty by year 10. Smoothing withdrawals across low-income years reduces the tax bite.
For accounts where the decedent HAD started RMDs: Take the calculated annual RMD each year (Schwab’s calculator can help), then draw additional amounts in years when your income is lower. The remaining balance must be zero by December 31 of year 10.
For inherited Roth IRAs: Take nothing in years 1–9 and let the account grow tax-free. Withdraw everything in year 10 — completely tax-free if the original Roth met the 5-year rule.
Schwab Tools for Inherited IRA Management
- Beneficiary Distribution Center — Dedicated support team for estate and inherited account transfers
- RMD Calculator — Estimates required distributions based on IRS life expectancy tables
- Schwab Intelligent Portfolios — Available for inherited IRAs if you prefer automated management
- Form 1099-R — Schwab issues this for all distributions; you report inherited IRA income on your own tax return
Related Schwab Guides
- Schwab Traditional IRA 2026 — Deduction Rules & Limits
- Schwab Roth IRA 2026 — Limits, Rules & How to Open
- Schwab Backdoor Roth IRA 2026 — Step-by-Step Guide
- Schwab SEP-IRA 2026 — Limits, Setup & Comparison
- Charles Schwab — Complete Investor Guide 2026
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