IRA Beneficiary Distribution Options


Beneficiary distribution rules for traditional Individual Retirement Accounts (IRAs) take effect when one or more individuals inherit such a savings account after the original owner dies. Because the Internal Revenue Service (IRS) has the authority to tax distributed IRA funds, beneficiaries should follow the relevant guidelines to avoid penalties and taxes on their inheritance.

Beneficiary Types

IRA beneficiaries fall into three primary groups. Spouses are the legally married partner of the deceased, non-spouses are relatives and other people, and non-humans are entities like trusts and organizations.

Inheritance Types

Inherited IRAs are also distinguished by the age of the original owner at death. If the individual was over 70 1/2 years old, then mandatory annual minimum distributions should have already started.


A spouse can roll over the inherited account into her own IRA, convert it to a beneficial IRA jointly owned by her and her deceased spouse, or give it away to a third party.


Non-spousal beneficiaries cannot merge an inherited IRA into their own IRA. Otherwise, they have the same distribution options as spouses.


Since life expectancy doesn't apply to non-human entities like charities and estates, IRAs bequeathed to them must be cashed out and applicable taxes paid.


An early withdrawal penalty of 10 percent applies only to spousal beneficiaries younger than 59 1/2 who withdraw funds from a rolled over inherited IRA.

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