10/28/2026
Your kids will inherit your IRA tax-free.
That's what a lot of business owners assume. It's not quite true.
Under the SECURE Act, most non-spouse beneficiaries, including most adult children, can no longer stretch inherited IRA or 401(k) withdrawals over their lifetime. In most cases, the account has to be fully emptied within 10 years of the original owner's death. Some heirs also owe distributions in years 1 through 9, and missing one can trigger an IRS excise tax.
Here's the part that catches families off guard: those withdrawals count as ordinary income. Add that to income from a family business, and an heir can land in a much higher tax bracket than expected.
A few exceptions still apply (spouses, minor children, disabled or chronically ill beneficiaries, and beneficiaries close in age to the original owner). For everyone else, timing matters more than it used to.
We wrote up how this works, including planning ideas like Roth conversions, trust beneficiaries, and charitable giving: https://www.theretirementsmith.com/insights/inherited-ira-secure-act-tax-planning
If you're wondering how this affects your own estate plan, send us a message. Happy to talk it through.
