Married couples with children can make the most of an IRA. Suppose Al Brown dies with $100,000 in his IRA. Al has named his wife Beth as beneficiary of that account. As a surviving spouse, Beth can roll over the IRA she inherited from her husband into her own IRA. Then she can name beneficiaries of her IRA and take required distributions.
Suppose Beth is 75 then. According to the IRS Uniform Distribution Table, she and a beneficiary have a joint life expectancy of 22.9 years. Thus, Beth must withdraw at least 1/22.9 (4.4 percent) of the IRA that year. The other 95.6 percent can stay in the IRA, earning tax-deferred income. The next year, Beth must withdraw 1/22 of the new balance in her IRA. And so on, each year.
Suppose Beth dies with the IRA balance still at $100,000. Her son Dave, the beneficiary she has named, can’t roll over that IRA to his own IRA but he can re-title the account as an inherited IRA the name of Beth Brown (deceased) for the benefit of (f/b/o) Dave Brown.
If Dave is 47 years old then, he has a 37-year life expectancy on the IRS Single Life Expectancy Table For Inherited IRAs. Therefore, Dave would have to withdraw at least 1/37 (2.7 percent) of the IRA balance that year, leaving 97.3 percent for further tax-deferred growth.
