Inherited IRA Rules in South Carolina: What Beneficiaries Need to Know in 2026

If you’ve inherited an IRA in South Carolina, what you do next can have significant tax consequences.

The rules for inherited IRAs have changed substantially in recent years. The SECURE Act eliminated the traditional “stretch IRA” for many beneficiaries, and newer IRS rules affect when distributions may have to be taken during the 10-year period.

Your options depend on several factors, including:

• Whether you inherited the IRA from your spouse or someone else
• Your age
• The age of the person who died
• Whether the original owner had begun required minimum distributions
• Whether you’re considered an Eligible Designated Beneficiary
• Whether the account is a Traditional IRA or Roth IRA

Before moving or withdrawing inherited retirement assets, make sure you understand which rules apply to your situation.

What Is an Inherited IRA?

An inherited IRA is an IRA received after the death of the original account owner.

You may also hear it referred to as a beneficiary IRA.

Inherited IRA rules are different from the rules governing an IRA that you established and funded yourself.

One of the most important distinctions is whether you are the surviving spouse of the original IRA owner or a non-spouse beneficiary.

If You Inherited an IRA From Your Spouse

A surviving spouse generally has more options than other beneficiaries.

Depending on the circumstances, these may include:

• Treating the IRA as your own
• Rolling eligible assets into your own IRA
• Keeping the assets in an inherited IRA
• Taking distributions
• Converting eligible Traditional IRA assets to a Roth IRA and paying applicable income taxes

The best choice depends heavily on your age, financial situation and when you expect to need the money.

Option #1: Take a Lump-Sum Distribution

A beneficiary generally has the option to withdraw money from an inherited IRA.

However, withdrawing the entire balance of a large Traditional IRA in one year can create a substantial federal income-tax bill.

Traditional IRA distributions are generally included in taxable income unless the distribution represents after-tax basis or another exception applies.

For example, imagine inheriting a $500,000 Traditional IRA and immediately withdrawing the entire account.

That $500,000 distribution could significantly increase your taxable income for that year.

That’s why the first question shouldn’t necessarily be:

“How quickly can I get the money?”

A better question may be:

“What is the most appropriate way to distribute this account given my circumstances and tax situation?”

Option #2 for a Spouse: Treat the IRA as Your Own

A surviving spouse may have the ability to treat an inherited IRA as his or her own.

This can simplify retirement planning and may allow eligible assets to be combined with the surviving spouse’s existing IRA.

However, don’t automatically choose a spousal rollover without first considering your age.

Why Your Age Matters for a Spousal Inherited IRA

A surviving spouse who is younger than age 59½ and expects to need money from the account may want to carefully compare a spousal rollover with maintaining an inherited IRA.

Why?

Distributions from an inherited IRA to a beneficiary generally aren’t subject to the 10% additional tax for early distributions that can apply to distributions from an individual’s own IRA before age 59½.

That can make the inherited-IRA structure valuable in certain situations.

Once the surviving spouse reaches an appropriate age or circumstances change, additional options may become available.

Option #3 for a Spouse: Keep It as an Inherited IRA

Instead of immediately treating the account as his or her own, a surviving spouse may be able to maintain the account as an inherited IRA.

This can be useful in certain situations, particularly when the surviving spouse is younger than 59½ or when distribution timing is important.

The rules governing when a surviving spouse must begin distributions depend upon several factors, including the age of the deceased spouse and applicable RMD rules.

Because these rules have changed in recent years, don’t rely on older articles referring to age 70½.

Can a Surviving Spouse Convert an Inherited Traditional IRA to a Roth IRA?

A surviving spouse who properly moves eligible inherited assets into his or her own Traditional IRA may potentially convert some or all of those assets to a Roth IRA.

A Roth conversion can create a significant current federal income-tax liability because taxable amounts converted are generally included in income for the year of conversion.

The potential advantage is that qualified Roth IRA distributions can ultimately be tax-free.

But a Roth conversion isn’t automatically beneficial.

The decision should consider:

• Your current federal income-tax bracket
• Your expected future tax situation
• Other retirement income
• Social Security
• Medicare-related considerations
• How long you expect the money to remain invested
• Your beneficiaries and estate-planning objectives

Consider coordinating a Roth conversion decision with your tax professional.

Inherited IRA Rules for a Non-Spouse Beneficiary

The rules are considerably different if you inherit an IRA from someone who was not your spouse.

For example, this could occur when:

• A parent leaves an IRA to an adult child
• A grandparent leaves an IRA to a grandchild
• A sibling inherits an IRA
• An unmarried partner inherits an IRA
• Another individual is named as beneficiary

A non-spouse beneficiary generally cannot simply combine an inherited IRA with his or her own IRA.

The account generally needs to remain properly titled as an inherited account for the beneficiary.

The Inherited IRA 10-Year Rule

The SECURE Act dramatically changed inherited IRA planning for many non-spouse beneficiaries.

For many designated beneficiaries who inherited retirement accounts from someone who died after 2019, the inherited account generally must be completely distributed by the end of the 10th year following the original owner’s death.

This is commonly known as the 10-year rule.

However, the rules can become more complicated depending upon whether the original IRA owner died before or after the date he or she was required to begin RMDs.

Do You Have to Take Money Out Every Year During the 10-Year Period?

Sometimes.

This is one of the areas where older inherited IRA information can be particularly misleading.

Under current IRS rules, certain beneficiaries subject to the 10-year rule may also have to take annual required minimum distributions during years 1 through 9 when the original account owner died on or after the owner’s required beginning date.

The remaining account generally must then be fully distributed by the end of year 10.

If the original owner died before the applicable required beginning date, annual distributions during years 1 through 9 may not be required under the 10-year rule, but the account still generally must be emptied by the applicable deadline.

The exact rules depend upon the beneficiary and the original account owner’s circumstances.

Why the 10-Year Rule Creates a Tax-Planning Opportunity

The 10-year rule doesn’t necessarily mean you should wait until year 10 and then withdraw everything.

Doing so could potentially create a very large taxable distribution in a single year.

Imagine inheriting a $600,000 Traditional IRA while you’re still working.

If the account continues to grow and you wait until the final year to withdraw most of it, you could potentially add hundreds of thousands of dollars to your taxable income that year.

Instead, depending upon the applicable distribution rules and your circumstances, it may be worth evaluating distributions over several years.

Potentially important years could include:

• A year when your income temporarily decreases
• The years immediately after you retire
• Years before you begin Social Security
• Years before your own RMDs begin
• Other unusually low-income years

This is where inherited IRA planning becomes much more than simply following a distribution deadline.

Who Is Exempt From the Standard 10-Year Rule?

Certain beneficiaries are classified as Eligible Designated Beneficiaries (EDBs) and may qualify for different distribution rules.

These can include:

• A surviving spouse
• A minor child of the original account owner, until reaching the applicable age
• A disabled individual who meets applicable requirements
• A chronically ill individual who meets applicable requirements
• An individual who is not more than 10 years younger than the deceased account owner

Special rules and documentation requirements can apply, so eligibility should be evaluated carefully.

What About an Inherited Roth IRA?

Inherited Roth IRAs can also be subject to beneficiary distribution rules.

For many non-spouse beneficiaries, the account must still be distributed by the end of the applicable 10-year period.

However, Roth IRAs are treated differently from Traditional IRAs for certain RMD purposes because the original Roth IRA owner generally isn’t required to take lifetime RMDs.

Qualified distributions from an inherited Roth IRA may also be income-tax-free, subject to applicable requirements.

Don’t assume that “tax-free” means “no distribution rules.”

Can You Contribute to an Inherited IRA?

A non-spouse beneficiary generally cannot make new contributions directly to an inherited IRA as though it were his or her own retirement account.

The inherited IRA represents assets accumulated by the original owner.

Be Careful When Transferring a Non-Spouse Inherited IRA

If you want to move an inherited IRA from one financial institution to another, make sure the transfer is handled correctly.

A non-spouse beneficiary generally cannot use the same rollover procedures available to an IRA owner moving his or her own retirement account.

A properly structured trustee-to-trustee transfer can be particularly important.

Don’t request a distribution payable directly to yourself with the intention of simply depositing it into another inherited IRA without first confirming the rules.

Inherited IRAs and Creditor Protection

Inherited IRAs do not necessarily receive the same federal bankruptcy protection as retirement accounts funded by an individual’s own retirement savings.

The U.S. Supreme Court has held that inherited IRAs are not “retirement funds” for purposes of the federal bankruptcy exemption considered in that case.

State law and individual circumstances can affect creditor protection, so South Carolina residents concerned about asset protection should consult a qualified attorney.

South Carolina Taxes and an Inherited IRA

South Carolina residents should consider both federal and state tax consequences when planning inherited IRA distributions.

Traditional IRA distributions can generally create taxable income at the federal level, and South Carolina has its own rules governing retirement-income taxation and available deductions.

Your age, other income and individual circumstances can affect the state-tax result.

This makes coordination with a qualified tax professional particularly important when deciding when and how much to withdraw.

Common Inherited IRA Mistakes to Avoid

• Cashing out a large Traditional IRA without first estimating the tax consequences
• Assuming the old lifetime “stretch IRA” rules still apply
• Ignoring the 10-year distribution deadline
• Missing required annual distributions when they apply
• Improperly retitling a non-spouse inherited IRA
• Attempting an incorrect rollover
• Waiting until year 10 without considering the potential tax impact
• Failing to coordinate distributions with other retirement income
• Assuming inherited Traditional and Roth IRAs follow identical tax rules
• Making a spousal rollover without considering age 59½ and access to the funds

Example: Inheriting a $500,000 IRA From a Parent

Suppose a South Carolina resident inherits a $500,000 Traditional IRA from a parent and is subject to the 10-year rule.

Simply withdrawing the entire $500,000 immediately could potentially produce a substantial income-tax bill.

Waiting until the final year and withdrawing the entire remaining balance may also create significant taxable income.

Depending upon the applicable RMD rules and the beneficiary’s circumstances, it may make sense to evaluate distributions throughout the 10-year period.

For example, the beneficiary might consider how distributions interact with:

• Employment income
• Retirement date
• Social Security
• Other IRA distributions
• Tax brackets
• Medicare premiums
• Charitable planning

There isn’t one withdrawal strategy that’s appropriate for every beneficiary.

Inherited IRA Planning in South Carolina

Mintco Financial works with individuals and families throughout South Carolina who are navigating retirement and inherited assets.

This includes residents of:

• Greenville
• Spartanburg
• Anderson
• Columbia
• Charleston
• Mount Pleasant
• Rock Hill
• Aiken
• Hilton Head Island
• Bluffton
• Myrtle Beach
• Florence

Inherited IRA Planning in Greenville, SC

If you inherited an IRA while living in Greenville or the Upstate, don’t assume your only choices are to cash out the account or leave everything untouched for 10 years.

Understanding the distribution rules and coordinating withdrawals with your overall financial plan can be particularly important when the inherited account is substantial.

Inherited IRA Planning in Charleston and Mount Pleasant

Retirees and beneficiaries in Charleston and Mount Pleasant may have inherited retirement assets in addition to their own IRAs, 401(k)s, investments and Social Security benefits.

Coordinating these different assets can help you better understand the potential tax impact of inherited IRA distributions.

Inherited IRA Planning in Aiken, Hilton Head and Bluffton

South Carolina’s retirement communities include many individuals who have accumulated retirement assets across multiple accounts.

If you inherit an IRA while approaching or already living in retirement, distribution decisions can affect your broader retirement-income and tax strategy.

What Should You Do First After Inheriting an IRA?

Before making withdrawals or transfers:

1. Confirm the type of IRA. Determine whether it’s Traditional, Roth, SEP or SIMPLE.
2. Confirm your beneficiary status. Determine whether you’re a spouse, non-spouse beneficiary or Eligible Designated Beneficiary.
3. Determine the original owner’s date of death. This affects which inherited IRA rules apply.
4. Determine whether the original owner had reached the applicable RMD beginning date.
5. Verify whether an RMD was required for the year of death and whether it was completed.
6. Understand your distribution deadline.
7. Estimate the tax consequences before taking a large distribution.
8. Coordinate with qualified financial and tax professionals when appropriate.

Inherited IRA Financial Planning in South Carolina

Inheriting an IRA can be a meaningful financial event, but it can also create complicated decisions.

The account may represent decades of savings accumulated by a parent, spouse or another family member.

Before making a decision, understand the rules that apply to you and consider how the inherited assets fit into your broader financial life.

A thoughtful strategy may consider not only the inherited IRA itself but also your:

• Current income
• Retirement accounts
• Social Security
• Investment portfolio
• Tax situation
• Retirement date
• Income needs
• Beneficiaries
• Estate-planning objectives

Important Disclosure: This article is provided for general educational purposes only and is not intended as individualized investment, tax or legal advice. Inherited IRA rules are complex and depend on factors including the account owner’s date of death, beneficiary classification, account type, age and required beginning date. Tax laws and IRS guidance can change. Consult a qualified tax professional, financial professional and/or attorney regarding your individual circumstances before taking distributions, completing transfers or making other decisions involving inherited retirement assets.