Inherited IRA Rules for US Expats and NRA Heirs

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If you inherit a $200,000 traditional IRA from a parent while living abroad, the custodian can legally withhold $60,000 of the first distribution before sending you a cent — and you will not receive a Form 1099-R to file with your US tax return. The default 30% federal withholding rate that applies to non-resident alien beneficiaries of US retirement accounts catches most expat heirs completely off guard. Understanding the rules before the account owner dies can cut that withholding to 15% or lower and give you more flexibility over when you take the money.

This guide covers the SECURE Act 2.0 10-year distribution rule, the withholding trap for non-resident beneficiaries, the new 2025 annual RMD requirement during the 10-year window, and the practical steps you need to take within months of inheriting a US IRA from outside the country.

The 10-Year Rule for Inherited IRAs Under SECURE Act 2.0

For IRA owners who die after December 31, 2019, the SECURE Act replaced the old "stretch IRA" rules for most beneficiaries. Instead of taking distributions over a lifetime, most inheritors must deplete the entire account by December 31 of the 10th year following the owner's death.

If a parent dies in 2025, the deadline is December 31, 2035. The 10-year window does not require equal annual withdrawals — you can take nothing for years 1 through 9 and withdraw everything in year 10 — but a new rule effective January 1, 2025 changes that for some accounts (see below).

Who Can Still Stretch Beyond 10 Years

The law carves out a class of eligible designated beneficiaries (EDBs) who can still stretch distributions over their life expectancy rather than following the 10-year rule. For expats, the most relevant EDB categories are:

• The surviving spouse of the IRA owner — the most powerful exception; a surviving spouse can roll the inherited IRA into their own account entirely
• A disabled or chronically ill individual (per IRS definitions)
• Any individual not more than 10 years younger than the IRA owner (a sibling who is close in age, for example)
• A minor child of the IRA owner (stretch applies until the child reaches the age of majority, then the 10-year rule kicks in)

Everyone else — adult children living abroad, grandchildren, nieces, nephews — is a non-eligible designated beneficiary (NEDB) subject to the 10-year rule. Non-resident alien (NRA) beneficiaries who are not in one of those categories are also NEDBs.

The 30% Withholding Trap for Non-Resident Beneficiaries

When a custodian such as Fidelity, Vanguard, or Charles Schwab makes an IRA distribution to a foreign person, IRC Section 1441 requires 30% federal income tax withholding. The custodian reports the distribution on Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding), not on the Form 1099-R that US-resident beneficiaries receive.

This 30% withholding applies to distributions from traditional inherited IRAs. It does not reduce your total US tax liability — it is a prepayment of tax that you true up when you file a US nonresident return (Form 1040-NR). But if your actual US tax rate on those distributions is lower than 30%, you can claim a refund. And if a tax treaty applies, you may be able to reduce withholding at the source before any money leaves the account.

Reducing Withholding with Form W-8BEN

To claim a lower withholding rate under a US tax treaty, you must submit Form W-8BEN (Certificate of Foreign Status of Beneficial Owner) to the IRA custodian before any distribution is made. The form certifies your country of residence and allows the custodian to apply the treaty rate rather than the statutory 30%.

The custodian cannot grant treaty treatment unless Form W-8BEN is on file. If you submit it after a distribution has already been made at 30%, the withholding on that distribution cannot be retroactively reduced — you will need to file Form 1040-NR to claim the overpayment as a refund.

Pension and annuity withholding rates vary significantly by treaty. Many US income tax treaties reduce the rate on IRA distributions for residents of treaty countries. You can look up the specific rate for your country of residence in the IRS Tax Treaty Tables or in IRS Publication 901 (U.S. Tax Treaties). Each treaty's pension and annuity article governs what applies to IRA distributions.

The New Annual RMD Rule Inside the 10-Year Window (Effective 2025)

The IRS finalized regulations (REG-105954-20) effective January 1, 2025 that added a critical requirement many inheritors missed during the 2020-2024 transition period: if the IRA owner had already begun taking required minimum distributions (RMDs) before death, the inherited IRA beneficiary must also take annual RMDs during the 10-year depletion period — not just a lump sum at the end.

This matters for most adult-child inheritors. If a parent was over 73 and had started RMDs, the heir must take a minimum distribution in each of years 1 through 9, and then fully deplete the account by the end of year 10. IRS Notice 2023-54 provided transition relief for 2023 missed RMDs, but that relief has expired. Beginning with the 2025 distribution year, the annual RMD requirement is fully in effect.

If the owner died before their required beginning date (RBD) — meaning they had not yet started RMDs — the beneficiary has more flexibility: distributions can be taken in any pattern, as long as the account is empty by December 31 of year 10.

Beneficiary Type	10-Year Rule Applies?	Annual RMDs During 10 Years?	Alternative
Surviving spouse (EDB)	No — exempt	No	Roll into own IRA; take RMDs based on own age
Minor child (EDB)	Only after reaching majority	Yes, stretch over life expectancy until majority, then 10-year rule	Stretch until age of majority, then 10-year clock starts
Adult child or other non-spouse NEDB	Yes — 10 years from year of owner's death	Yes, if owner had started RMDs before death	None under current law
NRA beneficiary (NEDB)	Yes — 10 years	Yes, if owner had started RMDs; 30% withholding applies	Treaty rate via Form W-8BEN can reduce withholding
Estate or non-designated beneficiary	5-year rule if owner died before RBD; owner's remaining RMD schedule if after RBD	Depends on circumstances	Avoid by naming individual beneficiary on the account

Inherited Roth IRA for Expats

The same 10-year depletion rule applies to inherited Roth IRAs, but the tax treatment of distributions is more favorable. If the Roth IRA was established at least five years before the distribution, qualified distributions — including all principal and earnings — are free of US income tax.

For NRA beneficiaries: even Roth IRA contributions are not taxable when withdrawn, so the 30% withholding issue is reduced for accounts where the five-year aging requirement is met. Earnings from a Roth IRA that has not yet aged five years may be subject to withholding for NRAs. In practice, most parents who leave Roth IRAs to adult children abroad have accounts well past the five-year mark.

The spousal rollover option for Roth IRAs works the same way as for traditional IRAs: a surviving spouse who is an EDB can roll the inherited Roth into their own Roth IRA and reset the 10-year clock entirely.

Practical Steps When You Inherit a US IRA from Abroad

The timeline matters. Mistakes made in the first months after an IRA owner's death are difficult to undo. Follow this sequence to avoid the most expensive errors.

1. Notify the custodian immediately. Contact the brokerage (Fidelity, Schwab, Interactive Brokers, Vanguard, etc.) with a certified copy of the death certificate. Identify yourself as a named beneficiary.
2. Do not take any distribution before submitting Form W-8BEN. If your country of residence has a US tax treaty covering pension or annuity income, the treaty rate replaces the 30% default. Once 30% is withheld on a distribution, it cannot be undone at the source.
3. Establish a US TIN if you do not have one. An individual taxpayer identification number (ITIN) is required to file Form 1040-NR and to claim a refund for overwithholding. Apply using Form W-7 through the IRS or an IRS Authorized Acceptance Agent abroad.
4. Retitle the account as an inherited IRA. The account must be moved into your name as an "inherited IRA" (for example, "Jane Doe, Deceased, IRA for Benefit of John Doe"). Do not roll the balance into your own IRA unless you are the surviving spouse — a non-spouse rollover of an inherited IRA is a prohibited transaction and the entire amount becomes immediately taxable.
5. Decide whether to disclaim. If you wish to pass the inheritance to a contingent beneficiary (for example, to keep it inside the US for a tax-resident sibling), you have nine months from the date of the owner's death to file a qualified disclaimer under IRC Section 2518. This deadline is absolute.
6. Set up a distribution schedule. If the owner had started RMDs before death, calculate your annual RMD for the first year. Work with a cross-border tax professional to optimize the timing of distributions within the 10-year window to minimize total US and foreign tax.
7. File Form 1040-NR for each year you receive a distribution. The Form 1042-S you receive from the custodian is your key document. Report the distribution and claim any treaty benefit or refund of overwithholding on the 1040-NR for that year.

What Expat Parents Should Do Before They Die

If you are a US parent living abroad with adult children in foreign countries, the inherited IRA rules create a planning problem: your children will face 30% withholding and a 10-year mandatory depletion window. Here are the most common planning steps to consider:

• Name beneficiaries on every IRA and retirement account. If the IRA passes through your estate rather than directly to a named beneficiary, the 10-year rule becomes more restrictive and the estate (as a non-designated beneficiary) loses the stretch entirely.
• Convert traditional IRA funds to Roth before you die. A Roth IRA left to a non-resident heir is far more tax-efficient than a traditional IRA because qualified distributions are tax-free. The 10-year depletion requirement still applies, but withholding on tax-free Roth distributions is zero once the five-year clock has run.
• Coordinate with your estate plan. Our guide to expat estate planning for US citizens abroad covers will structure, trust considerations, and how to ensure accounts pass cleanly to foreign-resident heirs.
• Understand the IRD deduction. If your estate is large enough to owe estate tax, your foreign-resident heir can claim a Section 691(c) deduction on their 1040-NR for the proportional estate tax attributable to the inherited IRA. This deduction offsets income tax dollar-for-dollar.

For the broader picture of managing your own retirement accounts while living abroad, see our guide to expat 401(k) and IRA strategies.

The Bottom Line

Inheriting a US IRA from abroad combines two complex tax systems — the SECURE Act 2.0 distribution rules and the NRA withholding regime — in a way that most expat beneficiaries are not prepared for. The 30% withholding rate can be reduced, sometimes dramatically, through a timely Form W-8BEN and treaty claim. The 10-year depletion deadline is firm and now comes with annual RMD requirements if the original owner had already started distributions. Neither problem has a fix after the fact.

The most expensive mistakes happen in the first 90 days: taking a distribution before filing Form W-8BEN, rolling the inherited IRA into a personal IRA as a non-spouse, or missing the nine-month disclaimer window. If you have inherited or expect to inherit a US IRA while living abroad, involve a cross-border tax professional early — the withholding savings alone often exceed the cost of professional advice. The US expat banking and taxes guide can help you understand the broader compliance landscape while managing these accounts.

Data Notes / Sources Checked

• IRS Publication 590-B: Distributions from Individual Retirement Arrangements (2025) — 10-year rule, eligible designated beneficiary definitions, inherited IRA mechanics
• IRS: Plan Distributions to Foreign Persons Require Withholding — 30% default withholding, Form W-8BEN requirement, Form 1042-S reporting
• IRS Form W-8BEN: Certificate of Foreign Status of Beneficial Owner — required form to claim treaty reduced withholding rates
• IRS Tax Treaty Tables — country-specific pension and annuity withholding rates under US tax treaties
• IRS Notice 2023-54 — transition relief for missed inherited IRA RMDs during 2020-2024; final regulations effective January 1, 2025
• IRS Publication 515: Withholding of Tax on Nonresident Aliens and Foreign Entities (2026) — NRA withholding rules, presumption rules, documentation requirements

Data note: SECURE Act 2.0 provisions and final regulations under REG-105954-20 are effective for distribution calendar years beginning January 1, 2025. Annual RMD requirements during the 10-year window and transition relief from Notice 2023-54 were verified against current IRS guidance in June 2026.