The options are not the same for those who inherit IRAs compared to those who initiate IRAs as the American Legion published in "Five things to know about inheriting an IRA."
The list includes:
- People who create their own Roth IRAs are not required to take minimum distributions. However, those who inherit them are required to do so.
- All of the money in an IRA does not need to be taken out at once. Those who inherit can elect to take required minimum distributions based on their own life expectancy. This option must be initiated by December 31 of the year following the death of the original account holder.
- People who choose not to take out required minimum distributions must withdraw the full amount of the IRA within five years of the account owner's death. This option is available when the account originator passed away before reaching the age of 70½.
- Spouses can choose to treat the IRA as their own or as an inherited IRA. The rules must then be followed for whichever option the surviving spouse elects.
- Transferring an inherited IRA can only be done by moving it directly from one custodian to another. The funds cannot be withdrawn by the inheritor and later moved into a new IRA.
The rules and options can be confusing and an estate planning attorney could be helpful in meeting the challenges.
Reference: American Legion (March 16, 2016) "Five things to know about inheriting an IRA."