With an inherited IRA, in many cases the parent is the original beneficiary and the children are the successor beneficiaries. Both the original owner and beneficiaries need to follow some strict rules.
nj.com’s recent article, “Inheriting an inherited IRA? Your payout choices will be limited,” explains that per IRS rules, if you die prior to withdrawing all the funds from an inherited IRA, then the beneficiaries are bound by the same Required Minimum Distribution (RMD) schedule that they’d chosen, when they inherited it.
A person will typically choose either his own life expectancy or the life expectancy of the original plan participant, whichever’s longer. The successor beneficiaries must then keep withdrawing what’s left, according to that same schedule.
However, it’s different if you leave your own IRA to your children. In most circumstances, children who inherit an IRA would be able to withdraw the funds over their own life expectancies.
Note: this is the general rule. The IRA rules are quite complex, and there are many exceptions to the general rules. Ask the financial institution where the IRA is held, if they have any rules concerning their IRAs that may change the general rules.
With an inherited IRA, you need to take annual distributions no matter what age you are when you open the account. This doesn’t apply, if you've simply transferred another IRA to your own IRA. Again, as a general rule, you must take distributions during your lifetime or within five years after the original account holder passed away.
If you inherit a Traditional IRA, you’ll pay taxes on any distributions you take. Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs. In contrast, with an Inherited Roth IRA, you don’t pay taxes on distributions. To evaluate the potential effect an inheritance might have on your overall tax situations, talk to an experienced estate planning attorney.
Reference: nj.com (December 20, 2018) “Inheriting an inherited IRA? Your payout choices will be limited”