Can an Inherited IRA Be Split Between Siblings?

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An inherited IRA works a lot like a regular IRA. The money continues to grow tax-deferred, and withdrawals are taxed based on the type of account. If you inherit a traditional IRA, distributions are generally taxable. If it’s a Roth IRA, qualified withdrawals are typically tax-free.

The key differences come down to beneficiary rules.

A surviving spouse can usually roll the IRA into their own account. Siblings and other non-spouse beneficiaries don’t have that option. Instead, the funds must move into a beneficiary (inherited) IRA — either separate accounts for each sibling or one shared account.

From there, distribution rules vary depending on the beneficiary and situation, and those rules ultimately shape how and when the money must be withdrawn.

Why Split an Inherited IRA?

For many parents, naming multiple children as IRA beneficiaries — and clearly dividing the account — is the simplest way to avoid tension later. The account owner is the only person who can decide how the IRA will be split. And that decision carries real weight: IRA beneficiary designations override a will and bypass probate. The money goes directly to the named beneficiaries, according to the instructions on the account.

Most of the time, the transfer itself is straightforward.

Where things can get complicated is later — when it’s time to take distributions. That’s when timing, tax rules and differing financial goals between siblings can start to create friction.

IRS Rules for Splitting Inherited IRAs

When it comes to splitting an inherited IRA, the main requirement is simple: the assets must be divided according to the beneficiary designations on the account. Whatever the original owner put in writing is what controls.

Where it gets more complex is with withdrawal rules.

Inherited IRAs are subject to required minimum distribution (RMD) rules, and those rules changed significantly in 2020. If your estate plans or expectations were set before then, it’s worth revisiting them to make sure they still reflect current law.

The IRS groups non-spouse beneficiaries into three categories:

• Eligible designated beneficiaries
• Designated beneficiaries
• Non-individual beneficiaries, such as trusts

Which category applies determines how quickly the inherited funds must be withdrawn — and that timing can have a big impact on taxes and long-term planning.

Eligible Designated Beneficiaries

An “eligible designated beneficiary” has at least one of the following three characteristics:

• They are the spouse or minor child of a decedent
• They are chronically ill or disabled, and
• They are not more than 10 years younger than the IRA owner

This scenario doesn’t generally apply to siblings splitting an inherited IRA, unless they are minors. However, if minors do inherit an IRA, they can begin taking withdrawals annually based on their own life expectancy until the time they reach age 18, at which point they must follow the rules of designated beneficiaries.

Designated Beneficiaries

If you and your siblings are considered designated beneficiaries, you’ll generally fall under the 10-year rule. That means the inherited IRA must be fully emptied by the end of the 10th year after the original owner’s death.

But it’s not as simple as waiting until year 10 and withdrawing everything at once.

In many cases, you’re also required to take annual required minimum distributions (RMDs) during those 10 years. You can withdraw more than the minimum in any given year, but you must take at least the required amount based on IRS life expectancy tables.

So while you have some flexibility in how you spread out the withdrawals, the account can’t just sit untouched for nine years and then be drained at the last minute. The timing rules matter — and they can have real tax consequences if overlooked.

How To Split an Inherited IRA Between Siblings

Splitting an inherited IRA sounds complicated, but the steps are usually pretty manageable.

Here’s how it typically works:

• Confirm the beneficiaries. Start by reviewing the account’s beneficiary form. That document controls who inherits the IRA. If no beneficiaries were named (which is less common today), the account may have to go through probate.
• Open beneficiary IRAs. Each sibling will need to set up their own inherited (beneficiary) IRA. This is where their share of the original account will be transferred.
• Transfer the funds. The IRA custodian will divide the account according to the beneficiary designations (or court instructions, if probate is involved) and move the money into each sibling’s inherited IRA.

Remember This Important Deadline

If the IRA is being split into separate inherited accounts, the transfers generally must be completed by December 31 of the year following the original owner’s death. Missing that window can affect how distributions are calculated — so timing matters.

Are There Taxes When You Inherit an IRA?

Simply inheriting the account isn’t taxable. As long as the money stays inside a properly titled beneficiary (inherited) IRA, there’s no immediate tax bill.

This applies whether:

• Siblings share one inherited IRA, or
• Each opens their own separate beneficiary IRA

The tax issues arise if you miss required withdrawal rules.

What Happens If You Miss a Required Withdrawal?

If you forget to take your required minimum distribution (RMD), the IRS doesn’t just send a reminder — it sends a penalty.

You could owe 25% of the amount you were supposed to withdraw.

Here’s what that looks like: If your RMD was $5,000 and you didn’t take it, the penalty could be $1,250.

The good news is that if you catch the mistake and fix it within two years, the penalty may drop to 10%.

And while 25% sounds steep, it’s actually less severe than it used to be — before 2023, the penalty was a staggering 50%.

What If You Don’t Empty the Account in 10 Years?

Most non-spouse beneficiaries have to fully empty an inherited IRA within 10 years. That deadline isn’t flexible. If there’s still money left in the account after year 10, the IRS can impose a penalty of up to 50% of whatever remains.

For example, if $10,000 is still sitting in the account after the 10-year window closes, you could owe a $5,000 penalty.

In other words, the 10-year rule is hard stop. Planning withdrawals along the way helps you avoid a very expensive surprise at the end.

Best Tip for Managing an Inherited IRA

The bottom line is that you’ll want to work with a financial and/or tax advisor if you’re planning to split an inherited IRA with your siblings. As the ramifications for missing deadlines or otherwise failing to follow the correct procedure can be severe, it’s best to enlist the aid of a professional, particularly considering that the process of inheriting an IRA can also have a huge emotional component.

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