Inherited IRA Rules in Arizona: What the 10-Year Rule Means for Phoenix-Area Beneficiaries
The SECURE Act's 10-year rule, RMD requirements for inherited IRAs, and the tax planning moves Phoenix-area beneficiaries should consider before the December 31 deadline each year.
If you inherited an IRA in the last few years, the rules that govern it are almost certainly not the same rules your parents planned around. The SECURE Act of 2019 and its follow-on regulations replaced the old 'stretch IRA' with a 10-year distribution window for most non-spouse beneficiaries — and the IRS finalized annual RMD requirements inside that window in 2024.
The 10-year rule in plain English
For most non-spouse beneficiaries of an IRA owner who died after December 31, 2019, the entire inherited IRA balance must be distributed by December 31 of the tenth year following the year of death. Amounts left in the account past that deadline are subject to significant penalties.
Do I have to take an RMD each year within the 10 years?
Under IRS final regulations issued in 2024, if the original owner had already begun taking Required Minimum Distributions, most non-spouse beneficiaries must take annual RMDs in years 1-9 and empty the account by year 10. If the original owner died before their required beginning date, annual RMDs are generally not required, but the balance still must be gone by year 10.
Who qualifies as an Eligible Designated Beneficiary?
- Surviving spouses (with additional options, including spousal rollover treatment).
- Minor children of the account owner (until they reach the age of majority).
- Disabled or chronically ill individuals as defined by the IRS.
- Beneficiaries not more than 10 years younger than the deceased owner.
Tax planning moves worth modeling
For Arizona beneficiaries, the 10-year window often overlaps with high-earning years, which can push large distributions into higher federal brackets and drive IRMAA Medicare surcharges. Common planning moves include spreading distributions evenly across the 10 years, front-loading distributions in a low-income year (a gap year between jobs, for example), pairing distributions with Qualified Charitable Distributions from your own IRA if you are over age 70 1/2, and coordinating with capital-loss harvesting.
Community property considerations for Arizona surviving spouses
Arizona is a community property state. IRAs themselves are individual accounts by federal law, but the estate and beneficiary designation planning around them interacts with community property rules — particularly when beneficiary forms conflict with a will or trust. This is a place where coordination between your financial advisor, CPA, and estate attorney genuinely matters.
A note on tax and legal advice
Inherited IRA rules are technical and change with new IRS guidance. This article is educational and not a substitute for personalized tax or legal advice. We coordinate with your CPA and estate attorney to build the distribution plan; we do not replace them.
Frequently asked
Questions Scottsdale retirees ask us
- What is the 10-year rule for inherited IRAs?
- Under the SECURE Act, most non-spouse beneficiaries of an IRA owner who died after December 31, 2019 must fully distribute the inherited IRA by December 31 of the tenth year following the year of death. In many cases, annual RMDs are also required during that 10-year period.
- Do I have to take RMDs from an inherited IRA every year?
- Under IRS final regulations issued in 2024, if the original account owner had already reached their required beginning date for RMDs, most non-spouse beneficiaries must take annual RMDs in years 1-9 and empty the account by year 10. If the owner died before their required beginning date, annual RMDs are generally not required, but the 10-year deadline still applies.
- How is an inherited IRA taxed in Arizona?
- Distributions from an inherited traditional IRA are taxed as ordinary income at the federal level and at Arizona's flat 2.5% state rate. Distributions from an inherited Roth IRA are generally federally tax-free if the original account was open at least five years, and Arizona does not tax qualified Roth distributions.