David Chen was meticulous about his money. The 74-year-old retired IT director had spent 35 years at Hewlett Packard Enterprise in the Plano campus — arriving before 7 a.m., leaving after 6 p.m., contributing the maximum to his 401(k) every year without exception. When he and his wife Linda finally moved into their Twin Creeks home in Allen, his retirement accounts had grown to $1.2 million. He had a will. He had a financial advisor. He had done the things you are supposed to do.
His three adult children — Michael in Frisco (42), Jennifer in McKinney (39), and Kevin in Allen itself (37) — all had good careers of their own. Michael was a software manager earning $185,000 a year. Jennifer was a physician's assistant at Baylor Scott & White making $165,000. Kevin was a project manager at a logistics company taking home $148,000. David knew his IRA would create a tax liability when his kids inherited it, but his financial advisor had reassured him, years earlier, that they could each stretch their inherited distributions over their lifetimes — paying modest annual amounts at whatever tax rate applied to those modest distributions. At $9,000 a year of required distributions from a $400,000 inherited IRA, the tax hit was manageable. David felt good about what he was leaving behind.
David died in March 2025. Within a month, Michael called an estate planning attorney — not to plan, but to understand what had just happened. The answer changed the way the whole family thought about their father's legacy.
The stretch IRA his family had counted on no longer existed.
What the SECURE Act Did — and Why It Matters Now
On December 20, 2019, Congress passed the Setting Every Community Up for Retirement Enhancement Act — the SECURE Act (Pub. L. 116-94). It took effect January 1, 2020. For most people who read about it at the time, it seemed like a minor technical adjustment to retirement law. The headlines focused on the change to Required Minimum Distribution ages. Buried in the legislation was a provision that rewrote the inheritance rules for millions of American families.
Before the SECURE Act, most beneficiaries who inherited an IRA could take what were called "stretch" distributions — annual Required Minimum Distributions calculated against the beneficiary's own life expectancy. A 42-year-old inheriting a $400,000 IRA might calculate a first-year RMD of roughly $9,500 (using the IRS Single Life Expectancy Table). That amount would grow gradually each year as the life expectancy factor shortened, but the distributions remained modest for decades — and the untouched portion of the account kept compounding, generating wealth over a 40-year period.
After the SECURE Act, that option disappeared for most beneficiaries. Under IRC § 401(a)(9)(H), non-eligible designated beneficiaries — which includes most adult children — must now completely drain an inherited IRA by December 31 of the tenth year following the account owner's death. No stretching over a lifetime. Ten years. Total depletion required.
For Michael, Jennifer, and Kevin Chen, each inheriting roughly $400,000 of pre-tax retirement funds, this was not an inconvenience. It was a $140,000 problem.
The Two Versions of the 10-Year Rule
The 10-year rule is the headline, but its mechanics depend on one critical fact: whether the original IRA owner had already reached their Required Beginning Date when they died.
The Required Beginning Date (RBD) is April 1 of the year following the year the account owner turns 73. David Chen was 74 when he died — past his RBD, already taking his own Required Minimum Distributions. That status matters profoundly for what his children now must do.
In July 2024, the IRS issued final regulations (T.D. 10001) that settled a question that had generated enormous confusion since 2020. The regulations confirmed: when an IRA owner dies on or after their Required Beginning Date, non-eligible designated beneficiaries using the 10-year rule must still take annual RMDs in years one through nine, calculated against the beneficiary's own single life expectancy — and then drain whatever remains in year ten.
If David had died before his Required Beginning Date — say, at age 68, before he started his own RMDs — his children would have had more flexibility. They could have taken nothing in years one through nine and taken everything in year ten, allowing the account to continue growing tax-deferred. That flexibility is still valuable, even under the 10-year deadline.
Because David died at 74, that flexibility is gone for his children. They must take a calculated RMD every year. The account still drains completely in ten years — but they cannot defer all distributions until the end.
The Real Tax Math: What $400,000 Looks Like Over Ten Years
Here is what the 10-year rule actually produced for each of the Chen children, assuming modest 6% annual growth on the inherited account and consistent income from their existing careers.
In year one of the inherited IRA, each child has a $400,000 account. The RMD for a 43-year-old (Jennifer's age in year one) using the IRS Single Life Expectancy Table is approximately $400,000 divided by 41.8 — roughly $9,569. That amount lands on top of Jennifer's $165,000 salary. Her marginal federal tax rate on that RMD is 32%. Tax on that distribution alone: $3,062.
By year five, the account has grown to approximately $480,000 (after the prior distributions). The remaining life expectancy factor has shortened to 37 years. Year-five RMD: roughly $12,970. Still manageable — but Jennifer's salary has also grown over five years.
Here is where the problem compounds: by year eight, nine, and ten, the account holds a large balance that must be depleted within a short window. In year ten, the Chen siblings must withdraw whatever remains — which for a well-invested account that was not dramatically drawn down in early years could be $200,000 or more — in a single calendar year. That distribution is ordinary income. For Michael Chen, earning $185,000 in his peak career years plus a $200,000 IRA distribution, his marginal federal rate on the IRA income is 37%.
Across ten years, each Chen child will have paid an estimated $45,000 to $50,000 in federal income taxes on their inherited portion — a combined family tax bill of roughly $140,000. Under the old stretch rules, distributing the same $400,000 over 40 years would have generated less than half that tax burden, because most distributions would have been taxed at lower rates during years when each child was drawing down in retirement.
David Chen did not create this outcome deliberately. His estate plan was built on rules that no longer exist.
Who Is Still Protected: Eligible Designated Beneficiaries
Not every beneficiary faces the 10-year rule. The SECURE Act created a category called eligible designated beneficiaries — five groups who retain the right to stretch distributions over their own life expectancy under IRC § 401(a)(9)(E)(ii):
- Surviving spouses — who can treat the IRA as their own, deferring all distributions until they reach their own Required Beginning Date and naming new beneficiaries under their own rules.
- Minor children of the account owner — until the child reaches the age of majority, at which point the 10-year rule applies to the remaining balance.
- Disabled individuals — as defined by IRC § 72(m)(7).
- Chronically ill individuals — as defined by IRC § 7702B(c)(2).
- Individuals not more than 10 years younger than the account owner — a sibling, a friend, or a younger spouse within 10 years of the account holder's age.
Questions about estate planning? A WG Law attorney can walk you through your options.
Linda Chen — David's wife, who is 72 — qualifies as a surviving spouse eligible designated beneficiary. She rolled her share of the community-property IRA into her own IRA and will take distributions on her own schedule, with no 10-year deadline. The SECURE Act's harshest provisions are reserved for the next generation.
For adult children in good health, at typical working ages, the eligible designated beneficiary protections provide no relief. Michael, Jennifer, and Kevin are adult, healthy, and between 7 and 37 years younger than their father. They are textbook non-eligible designated beneficiaries under the 10-year rule.
The Planning Strategies David Did Not Know He Needed
The Chen family's outcome was not inevitable. Several planning strategies — all requiring action during David's lifetime — could have materially reduced the tax burden his children now face.
Roth IRA conversions during retirement. A Roth IRA conversion involves paying income tax on some or all of a traditional IRA balance during the account owner's lifetime, converting it to a Roth IRA. Inherited Roth IRAs are still subject to the 10-year rule — but Roth distributions carry no income tax because the conversion was already taxed. Had David converted $100,000 per year in his early retirement years, when his own income was lower, the income-tax differential could have saved his children a substantial amount. This strategy requires careful planning — converting too much in a high-income year defeats the purpose — but the math frequently favors Roth conversions for parents who expect their children to inherit IRAs during their peak earning years.
Naming a charitable remainder trust as beneficiary. If David had charitable intentions, a charitable remainder trust (CRT) named as the IRA beneficiary can extend effective distributions beyond the 10-year window while still satisfying the SECURE Act's depletion requirement. The IRA drains into the CRT within 10 years; the CRT then pays an annuity to David's children for a defined period (or their lifetimes). The charitable deduction offsets some of the income tax, and the beneficiaries receive consistent cash flow over a longer term. This strategy requires a carefully drafted trust and is not appropriate for every family — but for an IRA the size of David's, it warrants serious consideration.
Leaving the IRA to lower-income beneficiaries. If David had grandchildren — or if his children expected dramatically different income trajectories — leaving the IRA to beneficiaries in lower tax brackets can reduce the tax cost of the 10-year rule. A grandchild who is a college student in year one of the inherited IRA has a very different tax profile than a physician's assistant earning $165,000. The SECURE Act's treatment of minors (the 10-year clock starts when the minor reaches the age of majority) adds a wrinkle to this strategy that requires careful analysis.
Life insurance to offset the tax liability. Some estate planning attorneys recommend funding an irrevocable life insurance trust (ILIT) so that the insurance proceeds — income-tax-free under IRC § 101(a) — offset the income taxes the children will pay on the inherited IRA. David could have purchased a survivorship life policy with Linda, naming the ILIT as beneficiary, designed to approximate the family's estimated 10-year tax burden. The children inherit less in pre-tax IRA funds but receive insurance proceeds that compensate for the tax cost.
Asset location — using the IRA for charitable giving. David's charitable interests could have been directed through the IRA rather than his estate assets. Qualified Charitable Distributions (QCDs) allow IRA owners age 70½ or older to transfer up to $105,000 per year (2024 figure, inflation-adjusted) directly from an IRA to a qualifying charity, satisfying part of the RMD without the distribution ever appearing as taxable income. Had David used QCDs to fulfill his charitable giving in his final years, the IRA balance available for his children — and therefore their 10-year tax obligation — would have been proportionally smaller.
Texas Considerations for Inherited IRAs
Texas is a community property state under the Texas Family Code § 3.002, which affects IRA planning in ways that are easy to overlook. Funds contributed to a retirement account during marriage are community property in Texas, even though the account is held in one spouse's name. The distinction between community and separate property matters when calculating each spouse's share of the account, and it affects which planning strategies are available for surviving spouses.
Texas also imposes no state income tax, which moderates but does not eliminate the federal income tax burden that the SECURE Act accelerates for inherited IRAs. North Texas families dealing with the 10-year rule are working entirely with the federal income tax code — but at rates of 22%, 24%, 32%, and 37% for the income ranges that characterize Allen's professional households, the federal exposure is substantial.
Probate and estate matters for Allen residents are handled through the Collin County Courthouse in McKinney — the county seat, located roughly ten minutes from Allen. Texas does not impose a state estate tax, but the decisions made in the estate planning office about IRA beneficiary designations have federal income tax consequences that compound over a decade after a death.
What David Could Have Done Differently
The Chen family's situation illustrates a problem that played out in estate planning offices across North Texas starting in 2020 — and continues today. The SECURE Act is now five years old, but estate plans created before 2020 still contain IRA beneficiary designations built around rules that no longer apply. Financial advisors who told clients their children could "stretch" inherited IRA distributions over 40 years were giving accurate advice before January 1, 2020. That advice is no longer accurate, and many families have not revisited their plans since before that date.
The planning opportunity for David was not to avoid leaving the IRA to his children. It was to understand that the law had changed and to structure the bequest accordingly — through Roth conversions in years when his own income was low, through QCDs that reduced the IRA balance while satisfying his charitable goals, or through a coordinated strategy with an estate planning attorney who understood the 2020 change and could map his assets against it.
Michael, Jennifer, and Kevin will manage. They have good incomes, competent financial advisors now working on optimal distribution timing, and a father who built real wealth for his family. The $140,000 in aggregate taxes is a setback, not a catastrophe. But it was not what David planned for his children — because he never knew he needed to plan for it.
Working With an Allen TX Estate Planning Attorney on IRA Planning
WG Law's estate planning attorneys serve Allen and the broader Collin County community from our McKinney office, ten minutes from Twin Creeks and Allen's major employment corridors. Taylor Willingham — founding attorney, author of five books on estate planning and elder law, Super Lawyers Rising Star 2019–2022, and attorney to more than 10,000 Texas families — regularly works with clients on IRA beneficiary planning in the post-SECURE Act environment. Carla Alston brings an LL.M. in Taxation from NYU School of Law and 39 years of practice — including in-house tax counsel experience at Alcon Laboratories — to clients whose estates require a precise understanding of how federal income tax intersects with retirement account distributions and estate transfers.
If your estate plan was created before 2020, includes significant IRA or 401(k) assets, and names adult children as beneficiaries, it was designed around rules that no longer exist. A review of your beneficiary designations and the income-tax trajectory of each inherited account is not a luxury — it is the difference between a thoughtful bequest and an accidental tax problem.
This article is for general informational purposes only and does not constitute legal or tax advice. IRA distribution rules are complex and fact-specific; consult a licensed Texas estate planning attorney and a qualified tax professional before making decisions about your retirement accounts or beneficiary designations.
Call 214-250-4407 or request a consultation with WG Law's estate planning team in McKinney, serving Allen, Frisco, Plano, McKinney, and greater Collin County. For further reading, see our guides on getting beneficiary designations right in a Texas estate plan, the Texas pour-over will and living trust funding gap, why revocable living trusts are essential for Texas families, and estate planning considerations for Frisco families. You can also explore WG Law's estate planning practice, the standalone Texas estate planning cost guide, and the firm's Allen, TX service area.