Take the money and don't run

My four siblings are listed as beneficiaries of my Roth IRA. If I predecease them, will they have to pay tax on this inheritance, or can they transfer the money to their own accounts?

All distributions from a Roth IRA are tax-free, so your siblings won't owe income taxes on your account if they inherit it. But they will have to take annual withdrawals. And they won't be able to transfer your Roth IRA into accounts in their own names.

As with traditional IRAs, there's one set of rules for a Roth IRA beneficiary who's the surviving spouse of the original account owner, and another for nonspouse beneficiaries like children, siblings, other relatives and friends.

After you die, your account can be divided into separate inherited Roth IRAs for each of your siblings. But each of these new inherited accounts must bear your name as the original owner, listing your sibling as its beneficiary. A nonspouse beneficiary can't become the owner of an inherited Roth IRA. (By contrast, a surviving spouse can roll an inherited Roth IRA into his or her own name, becoming its new owner and avoiding required annual minimum distributions.)

If you're a nonspouse beneficiary, you must take minimum annual distributions from an inherited Roth IRA. These distributions are based on your life expectancy as it appears in the Internal Revenue Service "Single Life Expectancy Table for Inherited IRAs," in IRS Publication 590. (You can find it at irs.gov and download the PDF file.)

Beneficiaries shouldn't assume they can ignore this distribution requirement because the distributions are tax-free. There's a 50 percent penalty for each required distribution you don't take. In other words, the penalty for failure to take a required $2,000 distribution is $1,000.

The bottom line Roth IRA nonspouse beneficiaries must take annual distributions from inherited accounts.

Websites with more information 1.usa.gov/14p2jOD and 1.usa.gov/19bGW8G