Inherited IRA Rule Changes for 2025: What Shaker Heights & Northeast Ohio Families Need to Know are essential as starting in 2025, many non-spousal heirs — including most adult children — may be required to take annual RMDs (Required Minimum Distributions) from inherited IRAs if the original owner had already begun taking RMDs before they died. These beneficiaries must still empty the account within 10 years under the SECURE Act’s “10-year rule.” In previous years, the IRS waived penalties for missed inherited-IRA RMDs because of confusion around the rules, but that relief has ended. As highlighted in a recent CNBC article, “Inherited IRAs have a key tax change for 2025. What to know to avoid a penalty of up to 25%,” failing to take a required RMD beginning in 2025 can trigger a penalty of up to 25% of the amount that should have been withdrawn.
Anyone who inherited an IRA (Individual Retirement Account) needs to review their RMDs to prevent a hefty fine, especially families in Shaker Heights, Cleveland, and throughout Northeast Ohio who are expecting significant retirement-account inheritances. The change comes as investors are hearing about the “great wealth transfer” expected to transfer more than $100 trillion to heirs through 2048. Much of this wealth will move from parents to adult children, and tax planning should be done well in advance.
Some heirs will do better by depleting their inherited IRAs even before the ten-year timeframe set by the IRS. This depends upon individual tax situations.
Since 2020, certain inherited accounts have been subject to the ten-year rule. This applies to non-spouse beneficiaries, including adult children, if the original owner reached their own RMD age before they died. There was a lot of confusion about the 10-year rule, which led the IRS to waive penalties for multiple years of missed RMDs on inherited IRAs.
However, in 2024, the IRS released guidelines, and in 2025, heirs must start taking annual RMDs or face a whopping 25% penalty on the amount they should have withdrawn. It may be possible to cut the 25% penalty to 10% by withdrawing the correct amount within two years and filing Form 5329. Talk with your estate planning attorney or tax professional in Ohio to be sure this solution will work for you.
Even if RMDs don’t kick in for 2025, most heirs will still need to withdraw the balance within 10 years. This requires planning to avoid a tax hit if the heir waits until the last minute to empty the account. Some people think they can outwit the requirements by taking larger amounts during low-income years. However, because of newer tax breaks for seniors, those tactics could backfire.
There are many factors to consider when timing inherited IRA withdrawals, including taking RMDs from your own IRAs as well as an inherited IRA. A conversation with an estate planning attorney in Shaker Heights or the Cleveland area who understands the interplay of federal rules and Ohio’s tax structure who understands the interplay of new tax laws is advised before making an expensive mistake.
Hoping this all smooths out by itself is a mistake many people make when it comes to estate planning and taxes; it is not an adequate solution and could lead to a large tax bill.
If you’ve inherited an IRA or expect to receive one as part of a parent’s estate, now is the time to plan. If you’re in Shaker Heights or the greater Cleveland area, schedule a complimentary call with us and we’ll help you avoid unnecessary taxes, penalties, and expensive mistakes.
Reference: CNBC (Oct. 24, 2025) “Inherited IRAs have a key tax change for 2025. What to know to avoid a penalty of up to 25%”
