Spouse vs Non-spousal Heirs
The tax code treats IRAs inherited by children and other heirs differently from IRAs inherited by spouses. Spouses can simply roll inherited IRAs into their own accounts, postponing required minimum distributions - and taxes - until they turn 70.5. Non-spousal heirs don't have that option. To continue to benefit from tax-deferred growth, each heir must roll his or her portion of the IRA into a separate account known as an inherited IRA.
Rules to Take Distributions
Once heirs transfer the money into an inherited IRA, they can take annual distributions based on their own life expectancies. But to give your heirs this option, you must name them as beneficiaries of the IRA. If you name the estate as the beneficiary, your children will still inherit the money, but they will be required to clean out the IRA by the end of the fifth year after your death if you die before you turn 70.5, if you die after age 70.5, your heirs can take payouts based on your life expectancy, as set by IRS tables.
Roth Inheritance
A Roth inheritance is usually tax-free, but your heirs can't leave the money in the account forever. The rules for withdrawals are the same as they are for traditional IRAs. If your heirs transfer the money to accounts for inherited Roth IRAs, they can usually stretch withdrawals over their life expectancies.