IRAs can be wonderful tools for saving for retirement.  As it happens, though, many IRAs are not depleted of funds before the account owner passes away, and they wind up in the hands of a beneficiary.  If you’ve inherited an IRA, or if you will in the future, here are four things you should be aware of.

First, spouses have different requirements than non-spouses on inherited IRAs.  If you’re a spousal beneficiary, you might not have a required minimum distribution, even if you’re over age 70 ½ yourself.  It all depends on whether or not your spouse had reached RMD age in the year of death. Furthermore, as a spousal beneficiary, you have the option of rolling over your inherited IRA into one under your own name.  Keep in mind that depending on your age, this may or may not be a wise move.  Check with your financial advisor.

Second, lump sum distributions of the funds from an inherited IRA are always available.  As long as you’re not dealing with some illiquid asset in the IRA, you can take the funds out in one big chunk if you want.  And even if the heir isn’t yet 59 ½ years old, there’s no penalty for withdrawing the money like there would be for your own traditional IRA.  One caveat – you can get your hands on the money, but any funds you withdraw will be added to your income for that year and taxed at ordinary income rates.

Third, there is a 5-year rule on distributions on certain inherited IRAs. If the original account owner died before their RMD age, the beneficiary has the option to let those inherited IRA assets stay in the account for up to five years after the year of death.  At that point, the entire sum has to be distributed.  But this 5-year delay can allow you some time to do some tax planning, which can really be helpful if you expect your income will drop substantially before the five years is up.

Finally, if you inherit a Roth IRA as a non-spouse beneficiary, you actually have required minimum distributions.  You may have heard that Roth IRAs do not have RMDs, but this is true only for the owner and his or her spousal beneficiary.  If you miss an RMD from the Roth, there’s a 50 percent penalty on the missed amount. The good news is that the funds that you as a beneficiary are required to withdraw from a Roth that is at least 5 years old are not subject to any income tax at all.

Inheriting any money at all is always a nice thing.  But knowing what you can and cannot do once you get the money may allow you to keep just a little bit more.