Inherited IRA: Definition and How It Works in California

By Eric Ridley, attorney, Ridley Law. Updated September 2026.

An inherited IRA is a retirement account a beneficiary receives after the original owner dies. Federal law requires most beneficiaries who are not the owner’s surviving spouse to empty the account within 10 years, while a few categories of beneficiary get more flexible options.

How it works in California

Ridley Law’s inherited IRA and the 10-year rule in California covers how this plays out for local beneficiaries. The 10-year rule itself is federal, not state, law: under 26 U.S.C. § 401(a)(9)(H), a beneficiary who is not an “eligible designated beneficiary” must withdraw the entire account by the end of the tenth year after the owner’s death.

Federal law under 26 U.S.C. § 401(a)(9)(E)(ii) sets out who qualifies as an eligible designated beneficiary and gets more flexible treatment: the owner’s surviving spouse, a minor child of the owner, a beneficiary who is disabled or chronically ill, and a beneficiary no more than 10 years younger than the owner. Ridley Law’s inherited IRA tax map for California beneficiaries walks through how each category is treated.

Why it matters

Missing the 10-year deadline, or misjudging which category a beneficiary falls into, can turn a manageable inheritance into a tax problem. For example, an adult child who inherits an IRA and assumes they can stretch withdrawals over their own lifetime, the way older rules once allowed, may instead be required to empty the account within 10 years and face a larger tax bill than expected if they wait until the last possible year to take it all out.

Common mistakes

Assuming every beneficiary can stretch withdrawals over their lifetime; that flexibility is now limited to the eligible designated beneficiary categories. Treating a payable-on-death account and an inherited IRA as if the same tax rules applied to both; retirement accounts carry their own federal tax treatment that an ordinary payable-on-death account does not. Waiting until the final year of the 10-year window to take any distributions at all.

Related terms

• Beneficiary Designation: the form that names who inherits the IRA in the first place.
• Payable-on-Death Account: a similar beneficiary-driven transfer, but without the IRA’s federal tax rules.

Part of the California estate planning glossary. For the full treatment, see Inherited IRA and the 10-Year Rule in California.