Investment Portfolio Tracker for Inheritance Recipients: What to Track

Non-spouse beneficiaries must fully deplete inherited IRAs by December 31 of the tenth year following the original owner's death; if the original owner had begun required minimum distributions (RMDs), you must also take annual RMDs during those 10 years rather than deferring everything to year 10.

Yes, through stepped-up basis under IRC §1014: inherited stock or real estate receives a new cost basis equal to the fair market value on the date of death, meaning you can sell immediately with zero capital gains tax (see citation 2).

Yes, inherited Roth IRAs are subject to the 10-year rule, but all distributions are entirely tax-free if the original Roth had been held for at least 5 years at the original owner's death (see citation 4).

Non-spouse beneficiaries must fully deplete inherited IRAs by December 31 of the tenth year following the original owner's death; if the original owner had begun required minimum distributions (RMDs), you must also take annual RMDs during those 10 years rather than deferring everything to year 10.

The SECURE Act of 2019 created the 10-year deadline for most non-spouse inherited IRAs. The critical distinction finalized by the IRS in July 2024 is whether the original account owner had begun RMDs before death. If yes, annual RMD amounts are calculated using IRS tables (typically based on your age and relationship to the decedent) and must be withdrawn each year during the 10-year window. If no RMDs had begun, you can wait until year 10 to withdraw everything. Missing an annual RMD deadline triggers a 25% penalty on the shortfall (or 10% if corrected promptly, see citation 4). Your inheritance tracker should flag which category your inherited IRA falls into within the first month of receiving it.

Yes, through stepped-up basis under IRC §1014: inherited stock or real estate receives a new cost basis equal to the fair market value on the date of death, meaning you can sell immediately with zero capital gains tax (see citation 2).

Stepped-up basis is a one-time tax advantage unique to inherited assets. Unlike your own portfolio, where cost basis remains locked at your original purchase price, inherited property is revalued at the death-date fair market value the moment it becomes yours. If your relative bought Apple at $50 per share and it was worth $230 per share on the death date, your new basis is $230 — not $50. Selling immediately locks in that zero-gain outcome. This advantage expires once you hold the position for months without rebalancing, so a portfolio tracker must flag inherited taxable accounts separately and monitor the stepped-up basis rebalancing window in year one.

Yes, inherited Roth IRAs are subject to the 10-year rule, but all distributions are entirely tax-free if the original Roth had been held for at least 5 years at the original owner's death (see citation 4).

Inherited Roth IRAs follow the same 10-year depletion rule as inherited traditional IRAs, but the tax treatment is dramatically different. All distributions — both contributions and earnings — are tax-free as long as the original Roth met the 5-year aging rule. There are also no annual RMD requirements during the 10-year window unless the original owner had begun RMDs (less common with Roths, since Roths don't require RMDs during the original owner's lifetime). This makes inherited Roth accounts the most tax-efficient bucket for growth assets during the 10-year window, which is why asset-location tracking is critical: inherited Roth holdings should be invested more aggressively than inherited traditional IRA holdings.

High-yield bonds belong in tax-deferred accounts (inherited IRA or your own), while growth stocks belong in taxable accounts to benefit from stepped-up basis and deferred capital gains; tax-inefficient placement can compress year-one after-tax returns by ~$460 on a $200,000 inheritance.

Asset location — which asset class sits in which account type — is worth more than asset selection for inheritance recipients. Bonds and other high-income-yielding securities are taxed annually at ordinary-income rates; when placed in a taxable account, that drag repeats every year. Stocks, especially those held for appreciation rather than dividend income, defer tax until sale and can benefit from stepped-up basis on inherited positions. A $200,000 inheritance split 40/60 (bonds to stocks) can lose roughly $461 in year-one after-tax returns if bonds sit in taxable instead of tax-deferred. Over a 10-year inherited IRA window, this compounds to thousands in foregone returns, which is why a portfolio tracker surfaces asset-location drift as a monthly alert, not a quarterly review.

No — if the original owner died before their required beginning date (RBD, typically age 72 or 73), you can wait until the end of year 10 to withdraw the entire balance in one lump sum (see IRS Publication 590-B, citation 4).

The 10-year rule applies to everyone, but the RMD requirement during those 10 years is conditional. Only beneficiaries of account owners who had already begun RMDs must take annual distributions. If the original owner died before their RBD, you have full flexibility to let the account compound tax-deferred and withdraw everything in year 10 or in installments of your choosing. This distinction is crucial for tax planning: if you're in a low-income year, you can take a large withdrawal and stay in a lower bracket; if you're in a high-income year, you can skip or minimize the withdrawal. A tracker that doesn't distinguish between RMD-required and RMD-free inherited IRAs misses one of the core planning levers. If the inheritance frees up cash flow, you can also prioritize contributing to your own IRA (the 2026 limit is $7,500),(citation 5) which provides another tax-deferred growth bucket separate from the inherited account's 10-year deadline.

Stepped-up basis applies to taxable brokerage accounts, real estate, and collectibles; it does NOT apply to retirement accounts (IRAs, 401(k)s, etc.), which are fully taxable to beneficiaries and are treated as income-in-respect-of-decedent (IRD).

Stepped-up basis is an enormous tax advantage, but it's limited to non-retirement assets. Your inherited house, inherited stocks in a non-retirement account, inherited art, and inherited precious metals all receive a new basis at the death-date fair market value. Inherited IRAs, inherited 401(k)s, inherited HSAs, and inherited 529 plans do not — they retain the original owner's tax status and are fully taxable when withdrawn (with the exception of Roth accounts, where distributions are tax-free, see citation 4). This distinction shapes the entire inheritance strategy: taxable-account positions should be rebalanced aggressively in year one (because you can sell without tax consequences), while retirement-account positions should be left untouched until the 10-year deadline drives action.