IRA Precaution

If a child inherits an IRA from a parent, the child cannot roll the IRA into their own name to preserve the deferral of tax on the income generated within the IRA.  The best way to preserve the deferral mechanism is to retitle the IRA as an "inherited IRA."  For example, the retitling could go something like this: "John Jones IRA (deceased August 1, 2012) for the benefit of Joan Jones beneficiary."  If the money will be divided among heirs, each recipient should retitle his or her share.  So the key here is retitling an inherited IRA.  Correct titling is critical here.  If you get the titling wrong, the heir(s) could be taxed immediately on their whole share.