IRA Left to an Estate or Charity: What Are the Distribution Rules?

When an IRA has no named beneficiary — or names a non-individual such as an estate, charity, or non-qualifying trust — the SECURE Act 10-year rule doesn't apply. The rules that govern how quickly the account must be distributed are different, and the outcome is often worse. Here's what they are.

What makes someone a "designated beneficiary"

IRS rules treat the concept of "beneficiary" very specifically. A designated beneficiary under IRC § 401(a)(9)(E) must be an individual who is named (either in the plan documents or by the IRA owner) and identifiable as of September 30 of the year following the year of death — the beneficiary determination date.¹

Entities — estates, charities, corporations, non-qualifying trusts — are not individuals and therefore cannot be designated beneficiaries. Neither can a blank beneficiary designation. When no qualifying individual beneficiary exists on the beneficiary determination date, the IRA is treated as having no designated beneficiary (NDB), and the NDB distribution rules kick in.

Common situations that produce a non-designated beneficiary result

• The owner named their estate as beneficiary (directly, or through a will).
• The owner named a charity as the sole beneficiary.
• The owner named a trust that doesn't meet IRS "see-through" requirements (e.g., no individual remainder beneficiaries identifiable, or missing documentation requirements).
• The owner named an individual who predeceased them, with no contingent beneficiary named — and the account passes to the estate under the plan default.
• The owner simply never filed a beneficiary designation and the plan default sends it to the estate.

The two NDB distribution scenarios

Scenario A: Owner died before the Required Beginning Date — the 5-year rule

The Required Beginning Date (RBD) is April 1 of the year following the year an IRA owner turns 73 (or 75 for those born in 1960 or later).² If the IRA owner died before their RBD, and there is no designated beneficiary, IRC § 401(a)(9)(B)(ii) applies the 5-year rule: the entire account must be distributed by December 31 of the fifth year following the year of death.¹

There is no annual minimum required during the 5-year window — unlike the 10-year rule's annual RMD requirement that applies to non-EDB individuals when the decedent died after the RBD. But this flexibility has a hard cutoff: miss December 31 of year 5 and the remaining balance becomes subject to a 25% excise tax under IRC § 4974.³

Scenario B: Owner died on or after the Required Beginning Date — ghost life expectancy

If the IRA owner had already passed their RBD (i.e., they had started taking RMDs or were past the age when they should have), and there is no designated beneficiary, IRC § 401(a)(9)(B)(i) applies a different rule: distributions must continue at least as rapidly as they were being taken under the method in use as of the date of death.¹

In practice, this means distributions are calculated using the owner's remaining life expectancy from the Single Life Expectancy Table (IRS Publication 590-B, Table I), based on the owner's age in the year of death. Each subsequent year, the factor decreases by 1.0. This is sometimes called the "ghost life expectancy" rule — the owner's life expectancy continues driving the distribution schedule even after death.

Unlike the 5-year rule, the ghost life expectancy rule is not necessarily faster than the 10-year rule for a designated beneficiary. It depends on the owner's age at death: an owner who died at 73 still has roughly 18+ years of remaining life expectancy in the table, giving the estate more time to distribute than a 10-year rule individual. An owner who died at 85 has roughly 7 remaining years — less than the 10-year rule — making this outcome worse than what an individual would get.

What happens when the estate distributes to individual heirs

When an IRA passes through an estate to individual heirs, a question arises: can those heirs "stretch" the account based on their own life expectancies?

The answer is no. Individual heirs who receive IRA assets through an estate cannot establish inherited IRAs with their own distribution schedules. They are bound by the estate's distribution schedule — either the 5-year rule or ghost life expectancy, depending on the scenario — because the estate, not them, was the beneficiary on the determination date.

However, the estate can transfer the IRA assets to the individual heirs as beneficiaries (in kind, without triggering a distribution) if the applicable distribution schedule still has time remaining. When properly executed:

• Under the ghost life expectancy rule: the individual heir can establish an inherited IRA in their own name and continue taking distributions based on the remaining ghost life expectancy factor. They don't get their own stretch — they step into the estate's position.
• Under the 5-year rule: the heir inherits the estate's 5-year window. If the estate distributes in year 3, the heir has roughly 2 years remaining.

This transfer — from estate to individual heir in the form of an inherited IRA — requires custodian coordination and documentation. It must happen within the applicable distribution period, not after it expires.⁴

Charity as beneficiary

Charities are non-designated beneficiaries and face the same NDB rules. However, charities have a significant practical advantage: they pay no income tax on IRA distributions. A charity named as IRA beneficiary receives a $500,000 IRA distribution with zero federal income tax — the same amount that would cost an individual heir $100,000–$200,000 in taxes.

For this reason, naming a charity as IRA beneficiary (while leaving other non-IRA assets to individual heirs) is a commonly used estate planning strategy. The individual heirs receive stepped-up-basis assets — stocks, real estate — that can be sold with minimal capital gains. The charity receives the pre-tax IRA assets tax-free. Both sides are better off than if the IRA went through the estate and into individual taxable hands.⁵

This strategy is often paired with a qualified charitable distribution (QCD) — made directly from an IRA while the owner is alive — as part of a broader charitable giving plan. A fee-only advisor can model the tax impact of various beneficiary designations before death, which is the time to make changes.

Non-qualifying trust as beneficiary

Trusts can qualify as "see-through" trusts, allowing the IRS to "look through" the trust to its individual beneficiaries and treat those individuals as the designated beneficiaries. A see-through trust must meet specific requirements: it must be valid under state law, irrevocable at death (or become irrevocable at death), the individual beneficiaries must be identifiable, and documentation must be provided to the IRA custodian.⁶

If a trust fails to qualify as see-through — often because it includes a non-individual remainder beneficiary (like a charity), or because it lacks an identifiable "oldest" individual beneficiary — the IRA has no designated beneficiary. The same 5-year rule (pre-RBD) or ghost life expectancy (post-RBD) applies.

Trust beneficiary analysis is one of the more complex areas of inherited IRA planning. An improperly drafted trust can eliminate what might otherwise have been a 10-year stretch for individual beneficiaries — or even a lifetime stretch if an EDB was involved. An estate attorney and a financial advisor who understands the IRS requirements should review any trust that is intended to be named as an IRA beneficiary before the documents are finalized.

Why this matters if you're an executor or heir

If you've inherited an IRA through an estate — either because you're the estate executor or because you're a named heir of an estate that included IRA assets — the first thing to determine is which distribution scenario applies:

1. When did the IRA owner die? Before or after their Required Beginning Date?
2. Who is the current custodian holding the account? They need to be contacted immediately about establishing an inherited IRA or estate distribution account in the correct format.
3. What is the remaining distribution window? If the owner died several years ago, the 5-year clock may have already been ticking — possibly since their year of death. A missed distribution by December 31 of year 5 triggers an immediate 25% excise tax on the shortfall.
4. Is there still time to transfer assets to individual heirs as inherited IRAs? The window for this maneuver is constrained by the estate's distribution timeline.

How this differs from the SECURE Act 10-year rule

The 10-year rule under the SECURE Act applies to individual beneficiaries who are not eligible designated beneficiaries (EDBs) and who inherited from IRA owners who died after December 31, 2019. The NDB rules described on this page are different and apply regardless of whether the owner died before or after 2020 — they are pre-existing rules that the SECURE Act did not change.

A summary of who gets what:

• Surviving spouse (EDB): Rollover or lifetime stretch — best outcome.
• Other EDBs (minor child, disabled, chronically ill, close in age): Lifetime stretch — good outcome. See Eligible Designated Beneficiary guide.
• Individual non-EDB (adult child, sibling, most grandchildren): 10-year rule — must deplete by year 10. Annual RMDs required if owner died post-RBD. See Inherited IRA RMD Rules.
• Non-designated beneficiary (estate, charity, non-qualifying trust): 5-year rule (pre-RBD owner) or ghost life expectancy (post-RBD owner) — this page.

Sources

1. IRC § 401(a)(9)(B) — distribution rules when no designated beneficiary. Subsection (i): post-RBD, "at least as rapidly" as under method used at date of death (ghost life expectancy). Subsection (ii): pre-RBD, 5-year rule. IRC § 401(a)(9)(E): definition of designated beneficiary (must be an individual). IRC § 401(a)(9) (Cornell Law).
2. SECURE 2.0 Act of 2022 (Pub. L. 117-328), § 107 — raised RMD age to 73 for individuals born 1951-1959; age 75 for individuals born 1960 or later. IRS Notice 2023-75 implementing guidance. IRS — Required Minimum Distributions FAQs.
3. IRC § 4974 — excise tax on failure to take required minimum distributions. 25% rate on shortfall (10% if corrected within the 2-year SECURE 2.0 correction window per § 302). IRC § 4974 (Cornell Law).
4. IRS Publication 590-B (2025), "Inherited from someone other than spouse" — estate as beneficiary, transfer of assets to individual heir inherited IRAs. IRS Publication 590-B (2025).
5. IRS Publication 526 (2025), Charitable Contributions — tax treatment of IRA assets distributed to charities. Charities pay no income tax on IRA distributions received as beneficiary. IRS Publication 526 (2025).
6. Treas. Reg. § 1.401(a)(9)-4 — trust as designated beneficiary; see-through trust requirements. T.D. 10001 (July 2024) updated trust documentation requirements, eliminating some filing deadlines for IRAs. IRS — RMDs for IRA Beneficiaries (T.D. 10001 summary).

Non-designated beneficiary distribution rules reflect IRC § 401(a)(9)(B) and IRS Publication 590-B (2025 edition). Required Beginning Date reflects SECURE 2.0 age 73/75 rules effective 2023-2033. NDB rules were not changed by the SECURE Act — they predate it and remain the same for post-2019 deaths.