For most other people, inherited IRA withdrawals can be made for any amount and at any time. In other words, you must withdraw inherited funds within 10 years and pay income taxes on the amounts distributed. Since withdrawals are mandatory, you won't pay the 10% penalty if you're under 59 and a half years old. However, you must pay income taxes on distributions and, eventually, you will need to empty the account.
There is no limit to when or how often money is withdrawn from the account, as long as the account is empty at the end of 10 years. In other words, you can choose to withdraw all the money at once, leave it there for a decade and then withdraw it all, or you can withdraw the distributions over time. Just keep in mind that with a traditional IRA, every withdrawal will be counted as income and will be subject to taxes for the year in which you make the withdrawal. As a non-marital beneficiary, if you decide to transfer assets inherited from the original owner's IRA to an inherited IRA in your name, the assets won't stay in your inherited IRA forever.
Instead, you'll need to transfer your share of the assets to a new IRA created and formally called an inherited IRA; for example, (name of the deceased owner) for the benefit of (your name). As a non-marital beneficiary, you don't have the option of transferring inherited IRA assets to your own IRA. These rules don't apply if you've simply transferred another IRA to your own IRA, but are specific to inherited IRAs. The original owner of a Roth IRA never has to accept RMD, but those who inherit a Roth IRA do, unless they fall into one of the categories of exceptions.
Distributions from an inherited IRA may be taxed differently depending on the type of account; for example, assets inherited from a Roth IRA will be taxed differently than in a traditional IRA. As for combining IRAs for the same type of account, the answer is different when they are inherited from the same original owner, which is allowed. Inherited IRAs, also known as beneficiary IRAs, can be opened with assets inherited from traditional IRAs, as well as from Roth, SIMPLE, SEP or employee-sponsored retirement plans. While some states have laws that can still protect inherited IRAs, if a beneficiary is not their spouse and lives in a state without such laws, an inherited IRA is now considered like any other account owned by the beneficiary for bankruptcy purposes and may not be protected in the event of bankruptcy against creditor claims.
It's also important to note that while the original owner of a Roth IRA doesn't have to accept RMD throughout their life, beneficiaries who inherit a Roth IRA do need to apply for an RMD to avoid penalties. If you receive a check, the money will generally be taxed as ordinary income and cannot be deposited in an inherited IRA that you may have at another company, nor can it be redeposited in the inherited IRA from which it was first withdrawn. If you inherit a Roth IRA, it's completely tax-free if the Roth IRA was held for at least five years, starting on January 1.One of the important rules of an inherited IRA for non-spoiled beneficiaries is that all money in the account must be withdrawn by December 31 of the tenth year after the death of the original owner. If you are the child, grandchild, sibling, distant relative, or even close friend of the owner of an IRA who has named you a beneficiary, it is critical that you and the owner of the IRA understand the rules governing IRA inheritances.
If you inherit a Roth IRA as a spouse, you have several options, including opening an inherited IRA.