No, you will not be subject to the 10% penalty if you withdraw from the account based on the following rules.
Designated beneficiary (not an eligible designated beneficiary) If you are greater than 10 years younger than your grandparents, follow this:
10-year rule: If a beneficiary is subject to the 10-year rule,
- Empty the entire account by the end of the 10th year following the year of the account owner's (or eligible designated beneficiary's) death
Non-spouse beneficiary options
In 2020 and later, options for a beneficiary who is not the spouse of the deceased account owner depend on whether they are an "eligible designated beneficiary." An eligible designated beneficiary is
- Spouse or minor child of the deceased account holder
- Disabled or chronically ill individual
- Individual who is not more than 10 years younger than the IRA owner or plan participant
An eligible designated beneficiary may (this may not be you depending on the age of your grandparents)
- Take distributions over the longer of their own life expectancy and the employee's remaining life expectancy, or
- Follow the 10-year rule (if the account owner died before that owner's required beginning date)
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