What are my options if I inherit an IRA or benefit from an employer-sponsored plan?
If you don’t want the money, you can always disclaim (refuse to accept) the inherited IRA or plan funds. But if you’re like most people, you will want the money. Your first thought may be to take a lump-sum distribution, but that’s usually not the best idea. Although a lump sum provides you with cash to meet expenses or invest elsewhere, it can also result in a huge income tax bill (in most cases, due all in one year). A lump-sum distribution also removes the funds from a tax-deferred environment. Fortunately, you probably have other alternatives. If you are the designated beneficiary (i.e., you are named as beneficiary in the IRA or plan documents), you can take post-death distributions over your remaining life expectancy, spreading out distributions over a number of years. This life expectancy calculation will give you the minimum amount you must withdraw from the IRA or plan each year (you can always withdraw more than required in any year). Yearly distributions from the IRA or plan
