Required minimum distribution (RMD) rules are not just for IRA owners 70 1/2 and older. The RMD rules also apply to inherited IRAs. The IRS Single Life Expectancy table (www.irs.gov/pub/irs-pdf/p590.pdf, p. 90) shows how long beneficiaries can stretch out RMDs.
For instance, a 48-year-old heir has a 36-year life expectancy so a beneficiary would have to empty the account in 36 years. A 20-year-old beneficiary has a 63-year life expectancy so you can see why it might make sense to leave your IRA to a grandchild rather than to a child.
The official "designated beneficiary" of an IRA will be determined on September 30 of the year following death. That is, if you inherit an IRA from someone who dies in 2011, the designated beneficiary of the IRA won’t be determined until September 30, 2012.
Before that September 30 deadline, the designated beneficiary can be changed to some other beneficiary or contingent beneficiary that was named by the IRA owner. For example, if you are the primary beneficiary of an IRA and you don’t need the inheritance, you can disclaim in favor of the contingent beneficiaries. Disclaimers must be made in writing, within nine months of the IRA owner’s death. If your children are the contingent beneficiaries, they could extend distributions over their longer life expectancy.
