What Is the SECURE Act and How Does It Affect Inherited IRAs in Florida?

What Is the SECURE Act?

The SECURE Act — Setting Every Community Up for Retirement Enhancement — was signed into law in December 2019 and took effect on January 1, 2020. It was followed in December 2022 by SECURE Act 2.0, which layered additional changes on top of the original legislation.

The law touched many areas of retirement planning — contribution limits, RMD ages, part-time employee access to 401(k)s — but for most American families, the most consequential change was what it did to inherited IRAs. Specifically: it eliminated the strategy that had made inherited IRAs one of the most powerful intergenerational wealth transfer tools available.

The SECURE Act represented the most significant change to inherited IRA rules in 30 years. And most people who inherited IRAs after January 1, 2020 — or who will inherit them in the future — are operating under the new rules whether they know it or not.

The Old Rules: The “Stretch IRA”

Before 2020, a non-spouse beneficiary who inherited an IRA had access to what planners called the stretch IRA. The mechanics were straightforward: the beneficiary could take required minimum distributions (RMDs) spread over their own life expectancy, not the original owner's.

In practice, this was extraordinarily powerful. A 50-year-old who inherited a $500,000 IRA from a parent could spread distributions over 35-plus years, keeping annual withdrawals — and the resulting tax bill — small each year while the remaining balance continued to grow tax-deferred inside the account.

That was the strategic beauty of the stretch IRA: low annual withdrawals, low taxes each year, decades of continued tax-deferred growth. For families with careful estate planning, it was one of the most efficient tools available for passing wealth across generations.

The SECURE Act effectively eliminated it for most beneficiaries.

The New Rules: The 10-Year Rule

Under the SECURE Act, most non-spouse beneficiaries must now fully empty the inherited IRA within 10 years of the original owner's death. The entire account — however large — must be distributed and the account closed by December 31 of the 10th year following the year of death.

When the law was first passed, many tax advisors interpreted it favorably: yes, you have to empty the account within 10 years, but you can take the distributions however you want within that window. No required annual distributions. Take it all in year 10 if you want. Full flexibility.

Then the IRS stepped in.

The IRS Curveball: Annual RMDs Required in Many Cases

In 2022, the IRS issued proposed regulations that caught the planning community off guard. According to the IRS, if the original IRA owner had already reached their required beginning date (RBD) for RMDs — meaning they had already started taking RMDs or were required to — then beneficiaries must take annual RMDs in years 1 through 9 AND empty the account completely by the end of year 10.

This was not how most advisors had read the law. The IRS issued penalty waivers for 2021, 2022, 2023, and 2024 while it finalized the regulations, giving beneficiaries time to adjust.

In July 2024, the IRS issued its final regulations. The annual RMD requirement for inherited IRAs where the original owner had already reached their RMD age is now the law as of 2025. The waivers are gone. Beneficiaries who inherited from someone who was already taking RMDs must calculate and take their annual distributions — or face a 25% excise tax on the amount they should have withdrawn.

Florida Note: No State Income Tax Advantage

Here is where Florida residents have a meaningful edge over heirs in almost every other state: Florida has no state income tax.

Inherited IRA distributions are taxable as ordinary income at the federal level — there is no avoiding that. But in most states, those distributions are also subject to state income tax on top of the federal rate. A beneficiary in California, New York, or Oregon could be looking at combined rates north of 45%.

A Florida heir pays federal income tax only. That gap matters significantly when you are distributing tens of thousands of dollars per year from an inherited IRA — and it makes Roth conversion strategies especially compelling for Floridians, as we'll discuss below.

Who Is Exempt? The 5 Categories of Eligible Designated Beneficiaries

The 10-year rule does not apply to everyone. The SECURE Act created a category called Eligible Designated Beneficiaries (EDBs) — people who still qualify for the stretch IRA under the old rules. If you fall into one of these five categories, you may be exempt from the 10-year rule:

1. 1

   Surviving spouses

   A surviving spouse can roll the inherited IRA into their own IRA — preserving the stretch entirely — or treat themselves as the original owner. This is almost always the best option and is discussed in more detail below.

2. 2

   Minor children of the account owner

   A minor child of the IRA owner (not a grandchild or other minor) is exempt — until they reach the age of majority. Once the child turns 21 (or the age of majority under state law), the 10-year clock starts at that point. This is not a permanent exemption — it is a deferral.

3. 3

   Disabled individuals (IRC § 72(m)(7))

   Individuals who meet the IRS definition of disability under IRC § 72(m)(7) qualify for the stretch. The standard is specific: unable to engage in any substantial gainful activity due to a physical or mental impairment that is expected to result in death or last indefinitely.

4. 4

   Chronically ill individuals

   Defined under the tax code as someone requiring substantial assistance with at least two activities of daily living, or with severe cognitive impairment. This category often overlaps with disability but is distinct.

5. 5

   Individuals not more than 10 years younger than the account owner

   A sibling or friend close in age to the deceased — someone born within 10 years of the IRA owner — qualifies for the stretch. This was designed to protect people who inherited from a peer rather than a parent, where the age difference would otherwise make the 10-year rule especially punishing.

Robert, at 52, inheriting from his father, does not fall into any of these categories. He is subject to the 10-year rule in full — and because his father had reached his RMD age, Robert must also take annual RMDs starting in year one.

The Tax Trap: Why Florida Heirs Still Get Hit Hard

Florida's no-state-income-tax status helps — but the federal tax exposure from an inherited IRA is still significant, and the 10-year rule makes it easy to make mistakes that cost tens of thousands of dollars.

Here is what the math looks like for Robert:

The math is clear: if Robert takes no distributions for nine years and empties the account in year 10, he could face one of the largest tax bills of his life — all in a single calendar year. If he spreads distributions evenly over the 10-year window, he stays in a more manageable bracket and keeps significantly more of his inheritance.

But “taking distributions evenly” is not something that happens automatically. It requires a deliberate, proactive plan — ideally one coordinated with a CPA who understands how inherited IRA distributions interact with Robert's other income, investment gains, and deductions each year.

For Florida residents specifically: because there is no state income tax to layer on top, the federal bite is the entire story. That actually simplifies the math — but it does not make the federal tax exposure any smaller.

SECURE Act 2.0: Key Changes That Affect the 10-Year Rule

SECURE Act 2.0, signed in December 2022, added another layer of complexity. These changes affect when the 10-year clock starts and how much beneficiaries must withdraw each year.

What This Means for Florida Estate Planning

The SECURE Act did not just change what happens when someone inherits an IRA. It changed how families should think about estate planning before the IRA owner dies. The strategies that worked before 2020 require rethinking.

Trusts as IRA Beneficiaries: The New Danger Zone

Before the SECURE Act, naming a trust as the IRA beneficiary was a common strategy for high-net-worth families — it allowed the stretch IRA to continue while controlling distributions through trust terms. Post-SECURE Act, this approach requires extreme care.

The distinction that matters is conduit trust vs. accumulation trust. A conduit trust passes all IRA distributions through to individual beneficiaries immediately — it works reasonably well with the 10-year rule because the income flows to the beneficiaries at their individual tax rates. An accumulation trust retains distributions inside the trust, where income is taxed at compressed trust tax rates — reaching the 37% bracket at just $14,450 of income in 2024.

Naming a trust as an IRA beneficiary without verifying whether it is a conduit or accumulation structure — and whether it is even the right move after the SECURE Act — is one of the most expensive planning mistakes a Florida family can make. If your parents named a trust as the IRA beneficiary and you are now the trustee, get a tax attorney involved immediately.

Roth Conversions Before Death: The Florida Opportunity

With the stretch IRA gone, the most powerful gift a parent can give their heirs is converting a traditional IRA to a Roth IRA before death.

The 10-year rule still applies to inherited Roth IRAs — but the distributions are completely tax-free. A child who inherits a Roth IRA is subject to the same 10-year clock as a traditional IRA, but owes zero federal income tax on the distributions they take. The entire inheritance comes out tax-free.

This makes Florida an especially compelling place to execute a Roth conversion strategy. The IRA owner pays federal income tax on the conversion now — but their Florida heirs will receive those assets completely tax-free, with no state income tax and no federal income tax on distributions. For Florida families with significant IRA balances, Roth conversion is one of the most important conversations to have with a financial planner.

Surviving Spouse: Almost Always Roll It Over

If you are a surviving spouse inheriting your spouse's IRA, you should almost always roll the inherited IRA into your own IRA — not treat it as an inherited IRA. A spousal rollover preserves the stretch: your own IRA is not subject to the 10-year rule during your lifetime, and you can name your children as beneficiaries who then face the 10-year rule at your death. This buys another lifetime of deferral.

The spousal rollover is one of the most valuable elections in tax law. It is almost always the right move — with a few narrow exceptions that a CPA can identify based on your specific situation.

The Florida No-State-Income-Tax Advantage, Quantified

It is worth being explicit about what Florida's no-income-tax status actually saves a beneficiary receiving inherited IRA distributions.

In California, the top state income tax rate is 13.3%. In New York, up to 10.9%. In Oregon, 9.9%. For a beneficiary taking $50,000 per year from an inherited IRA in one of these states, the state income tax alone on that distribution is $5,000-$6,650 annually — on top of the federal tax.

For a Florida beneficiary, that number is zero. Every year. For ten years. On a $340,000 inherited IRA distributed at approximately $34,000 per year, a Florida beneficiary saves between $3,000 and $4,500 annually in state taxes compared to many other states — or $30,000 to $45,000 over the full 10-year distribution window.

The federal income tax exposure is real and requires planning. But Florida residency is a meaningful structural advantage for anyone managing inherited retirement assets. Families considering relocating for retirement should factor this into their analysis.

5 Common Mistakes That Turn an Inheritance Into a Tax Bill

1. 1. Waiting 10 years and taking one giant distribution

   This is the single most expensive mistake. Delaying all distributions to year 10 maximizes the bracket impact — potentially pushing the entire inherited IRA balance into the 35% or 37% federal bracket in a single year, on top of the beneficiary's regular income. Proactive annual distributions, spread strategically across the 10-year window, almost always result in significantly lower total tax paid.

2. 2. Naming a trust without verifying the conduit/accumulation structure

   As discussed above: an accumulation trust receiving IRA distributions can trap income at the 37% trust income tax rate at just over $14,000 of income. This is a planning disaster that plays out in slow motion, year after year, for the entire 10-year distribution period. If a trust is named as the IRA beneficiary, a qualified tax attorney should review the trust document before any distributions are taken.

3. 3. Not distinguishing between a traditional IRA and a Roth IRA

   The 10-year rule applies to both traditional and Roth inherited IRAs — but the tax treatment is completely different. Distributions from an inherited traditional IRA are taxable ordinary income. Distributions from an inherited Roth IRA are tax-free. Before developing a distribution strategy, you need to know which type of IRA you inherited. They are not the same.

4. 4. Assuming the “no annual RMD” interpretation still applies after July 2024

   The IRS waivers for 2021 through 2024 created a false sense of security. Many beneficiaries took no distributions for those years, believing they had full flexibility until year 10. As of 2025, beneficiaries who inherited from someone who had already reached their RMD age must take annual distributions. Failing to do so triggers a 25% excise tax on the amount that should have been withdrawn.

5. 5. Naming a charity and a person as co-beneficiaries without separating accounts

   If an IRA names both an individual and a charity as co-beneficiaries, the presence of the charitable beneficiary can eliminate the individual's ability to use the 10-year rule under certain interpretations — because a charity has no life expectancy and is not a “designated beneficiary.” The fix is simple before death: separate the IRA into two accounts, one naming the charity and one naming the individual. But this must be done before the IRA owner passes — not after.

A Planning Tool, Turned Into a Planning Trap

In 35 years of working with families on estate planning and wealth transfer, I have watched inherited IRAs go from one of the most elegant planning tools available to one of the most overlooked sources of unnecessary tax bills. The SECURE Act did not close a loophole — it eliminated a strategy that families had relied on for decades, often without realizing it had changed.

Robert's situation in Sarasota is exactly the kind of problem I see regularly: a well-meaning parent who built significant retirement savings, no coordination between the estate plan and the IRA beneficiary designations, and a child left holding the tax consequences. The difference between a windfall and a tax bill is not the size of the IRA. It is whether the family planned for the rules that actually exist.

Whether you are the one who will leave an IRA, or the one who will inherit one, the time to understand these rules is before the phone call from the CPA. Florida residents have a structural advantage that most of the country does not — use it deliberately, with a plan.

— Jacqueline Jimenez, CTFA | 35+ years in wealth and trust administration

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