If you have inherited an IRA, there are different rules you must follow, depending on your relationship to the person who made you the beneficiary of that IRA.
IRA Inheritance Choices
You can choose to draw out the minimum required distributions — known as a “stretch-out” – over your life expectancy, which extends the tax advantages of an IRA. Your withdrawals are calculated based on the IRS’ Single Life Expectancy table. To calculate the distribution, you take the balance of the IRA as of Dec. 31 of the previous year and divide it by your life expectancy as noted in the IRS table.
Spouse IRA Inheritance Rules
If you are a spouse who inherits an IRA, you have the choice to roll it over into your own IRA without penalty and put off taking distributions until you reach the age of 70 ½. If you are under the age of 59 ½, you should postpone the rollover until you reach that age to avoid any potential early withdrawal penalties.
If you are a non-spouse (that includes children, grandchildren, etc. – basically, anyone who was not married at one time to the decedent), you must start taking distributions from the inherited IRA by Dec. 31 of the year following the death of the IRA owner. So if you inherited an IRA in 2010, you have another month or so to begin taking a distribution. This applies to both traditional and Roth IRAs.