The California SECURE Act 10-Year Rule and Your Heirs

If you leave a traditional IRA or 401(k) to your adult children, the SECURE Act 10-year rule generally forces them to empty that account within ten years of your death, and in many cases to take a required withdrawal every year along the way. That compressed timeline can push your children into higher tax brackets and hand a large share of what you saved to the IRS. Here is what the rule actually says in 2026, who it hits, who is exempt, and what you can do now.

What Is the SECURE Act 10-Year Rule?

The SECURE Act, became law in 2020, and it ended what used to be called the stretch IRA. Before 2020, a child who inherited your IRA could take small required distributions spread across their own life expectancy, sometimes thirty or forty years, letting the account grow tax-deferred the whole time. Congress viewed that as a loophole and closed it.

Now, most non-spouse beneficiaries who inherit a retirement account must withdraw the entire balance by December 31 of the tenth year following the year you die. A child who inherits your IRA in 2026 has to drain it by the end of 2036.

For years, the common understanding was that a beneficiary could leave the money alone and take it all in year ten, or dip in whenever they wanted, as long as the account was empty at the end. The IRS finalized its regulations in July 2024, and that understanding is now only half right.

Do My Heirs Have to Take Money Out Every Year?

It depends on whether you had already reached your required beginning date for your own withdrawals when you died.

Your required beginning date is April 1 of the year after you turn 73. Once you pass that date, you are taking your own required minimum distributions. If you die on or after that point, your non-spouse beneficiary must continue taking an annual required distribution in years one through nine, and still empty the account by the end of year ten. If you die before your required beginning date, your beneficiary has flexibility. They can take nothing until year ten, take a little each year, or skip years, as long as the account is empty by the deadline.

This distinction is important. A family that assumes the money can sit untouched for ten years, when the parent died after 73, can miss required withdrawals and get hit with a penalty. The penalty for a missed required distribution is a 25% excise tax on the amount that should have come out, reduced to 10% if it is corrected promptly. The temporary relief the IRS granted for 2021 through 2024 has expired. These rules are being enforced now.

Roth IRAs work differently. Because there is no required beginning date for a Roth owner, a beneficiary of an inherited Roth generally does not have to take annual withdrawals. They still have to empty the account within ten years, but qualified distributions come out tax-free, which removes most of the pain.

Who Is Exempt From the 10-Year Rule?

Not everyone is subject to the ten-year cleanout. The law carves out a category called eligible designated beneficiaries, who can still stretch distributions over a longer period. They are your surviving spouse, your minor child (until age 21, after which the ten-year clock starts), a beneficiary who is disabled or chronically ill, and any individual who is not more than ten years younger than you.

Your spouse gets the most flexibility of anyone. A surviving spouse can roll your IRA into their own and treat it as if it had always been theirs, which sidesteps the ten-year rule entirely and delays required withdrawals until the spouse's own age 73. This is why, for most married California couples, naming your spouse as the primary beneficiary and your adult children as contingent beneficiaries is the right default while you are both alive.

The people the ten-year rule squarely hits are adult children, which is precisely the group most parents name. That is what makes this worth planning around.

Why the 10-Year Rule Creates a Tax Problem in California

California has no state estate tax, but it has a high state income tax. Every dollar your child pulls from an inherited traditional IRA is ordinary income to them, taxed at both the federal and California rate.

Consider a common situation. You leave a $1 million IRA to your daughter, who is in her peak earning years, already in a high tax bracket. Under the old stretch rules, she could have spread that income across decades. Under the ten-year rule, she has to absorb the entire $1 million on top of her regular salary within a single decade. Stack the top federal bracket on top of California's income tax, and a large slice of that account can go to taxes that better structuring might have softened. The same dollars, forced out faster, land in higher brackets.

This is not a reason to avoid saving in retirement accounts. It is a reason to think about how those accounts pass, and to whom, and in what order.

This is exactly the kind of planning we handle every day. Call us at (800) 394-1988 or schedule a free intro call and we will walk you through your options.

How Can I Plan Around the 10-Year Rule?

Several strategies can reduce the damage, depending on your family and your assets.

Name Beneficiaries in the Right Order

For most families, the cleanest approach is to name your spouse as primary beneficiary and your adult children as contingent beneficiaries while you are both alive. After the first spouse dies, the children move up to primary, with your trust available as a contingent backup. For adult children without special circumstances, naming them directly, rather than routing the IRA through a trust, usually keeps things cleaner and distributions easier.

Consider Roth Conversions During Your Lifetime

Converting some of your traditional IRA to a Roth while you are alive means you pay the income tax now, at your rate, instead of leaving your children to pay it at theirs during a compressed ten-year window. If your children are in higher brackets than you are, this can move a significant amount of money out of the tax collector's reach. It is not right for everyone, and the timing matters. Talk to your financial advisor.

Use a Trust Only When It Fits

Naming a trust as your IRA beneficiary makes sense in specific cases, chiefly when a beneficiary is a minor or has special needs. For a healthy adult child with no special circumstances, a trust as IRA beneficiary usually adds complication without a corresponding benefit and can accelerate the tax. The instrument should match the situation, not the other way around. We wrote about when this makes sense and when it backfires in our post on naming your living trust as your IRA beneficiary.

Coordinate With Your Living Trust Estate Plan

Beneficiary Designation Form. Your IRA does not pass under your living trust or your will. It passes by beneficiary designation, straight to whoever is named on your beneficiary designation form with your financial institution. A carefully drafted trust doesn't help if the beneficiary form for an IRA is out of date or blank. We see this constantly in trust administration: a beneficiary designation form naming an ex-spouse, deceased spouse, or naming no one, sending the account into probate or to the wrong person. Reviewing those designations is part of a complete plan.

Consider Uneven Distributions. Coordination also means the beneficiaries on your IRA do not have to match the split in your trust, and sometimes they shouldn't. Suppose you want to leave your home to one child and even things out by giving more of your IRA to your other children. That can be a sound plan, but remember that a dollar of house and a dollar of traditional IRA are not worth the same after taxes. The child who inherits the home gets a step-up in basis and can often sell with little or no capital gains tax. The children who inherit the IRA owe ordinary income tax, at both federal and California rates, on every dollar they withdraw across that ten-year window. Splitting assets evenly on paper can leave your children with unequal amounts in their pockets. 

Charities. What if you want to leave something to charity? Fund the charitable gift from your traditional IRA, not from your after-tax assets or your trust. A charity pays no income tax, so it receives the full value of the IRA with nothing lost to the ten-year rule or to ordinary income tax. Your children then inherit your home, your brokerage account, and your other assets that carry a step-up in basis and a far lighter tax load. Matching each asset to the beneficiary who is taxed most favorably can increase what everyone actually keeps. We walk through the mechanics in our post on naming a charity as your IRA beneficiary.

That reordering only works if your beneficiary designations and your trust are drawn up together, as one plan, rather than filled out piecemeal over the years.

For the mechanics of coordinating accounts and property with your trust, see our guide on how to fund your California living trust. And if you want to understand how virtual planning lets us handle all of this without you leaving home, see how our virtual estate planning works.

Frequently Asked Questions

Does the SECURE Act 10-year rule apply in California?

Yes. The SECURE Act is federal law, so it applies to California residents the same as everyone else. What makes California distinct is the state income tax layered on top of the federal tax. Because inherited traditional IRA withdrawals are ordinary income, a California beneficiary forced to drain an account within ten years can face a heavier combined tax bill than a beneficiary in a no-income-tax state.

Do my children have to take a distribution every year, or can they wait until year ten?

It depends on your age at death. If you die on or after your required beginning date (April 1 of the year after you turn 73), your non-spouse beneficiary must take an annual required distribution in years one through nine and empty the account by year ten. If you die before that date, they can take distributions in any amount at any time, as long as the account is empty within ten years.

Does the 10-year rule apply to a spouse who inherits my IRA?

No. A surviving spouse is an eligible designated beneficiary and can roll your IRA into their own, which avoids the ten-year rule entirely. The spouse then follows the normal required distribution rules based on their own age.

What is the penalty if my heir misses a required withdrawal?

The penalty is a 25% excise tax on the amount that should have been withdrawn, reduced to 10% if corrected within a timely window. The temporary penalty relief the IRS offered for 2021 through 2024 has ended, so these distributions are being enforced now.

Does the 10-year rule apply to Roth IRAs?

The ten-year cleanout applies, but annual required withdrawals generally do not, because there is no required beginning date for a Roth owner. Your beneficiary must empty the inherited Roth within ten years, but qualified distributions are tax-free, which removes most of the tax concern.

The Bottom Line on the SECURE Act 10-Year Rule

The SECURE Act 10-year rule turned the inherited IRA from a multi-decade gift into a ten-year tax event, and the finalized regulations mean many heirs also have to take a withdrawal every year along the way. For California families, the state income tax makes the stakes higher. None of this is a reason to panic. It is a reason to look at your beneficiary designations, think about the order your accounts pass in, and decide whether a Roth conversion or a coordinated plan makes sense for your family. That is the kind of work we do every day, directly with you, on a flat fee, from anywhere in California, and for most families a complete plan is finished in about three weeks.

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