The beneficiary designation on tax-deferred accounts, such as an IRA, will determine who receives the funds after the account owner is deceased. The beneficiary will then be responsible for making periodic withdrawals and paying ordinary income taxes on that income. When children or any other non-spouse recipient inherit an IRA, they can stretch the required withdrawals across their own life expectancy, deferring taxes until withdrawals are made. The younger the beneficiary, the less he or she has to withdraw each year and pay in taxes, and the more time the assets can continue to grow tax-deferred. The table that indicates the minimum required withdrawal can be found in IRS Publication 590. We would like your feedback on this Personal Finance Frequently Asked Question.

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