If you inherit a regular deductible IRA, you will pay ordinary income tax on anything you take out of the IRA. (If the person who left you the IRA made non-deductible contributions to the IRA, part of your withdrawal will be tax free.) You will not have to take the money out and pay income tax on it all at once, however.

If you inherit an IRA from someone other than your spouse, you must take minimum withdrawals (also called distributions) from the IRA each year, regardless of your age. The minimum distribution is based on your life expectancy; the older you are, the bigger it is. Any money you leave in the IRA will continue to grow tax deferred. You cannot combine an IRA inherited from someone other than your spouse with another IRA, nor can you contribute any more money to it.

If you inherit an IRA from your spouse, you can treat it as an inherited IRA, in which case the rules stated above apply. Or you can treat it as your own and roll it into a new or existing IRA in your name. In that case, the standard IRA rules apply. You won’t have to begin taking distributions until age 70.5.

For more see http://www.bankrate.com/brm/news/ira/20041006a1.asp.

If you inherit a Roth IRA, you will not owe income tax on distributions. However, the longer you leave the money in the account, the longer it will grow tax deferred.

If you inherit a Roth IRA from a spouse, you will not be required to take minimum distributions at any age. If you inherit a Roth IRA from someone other than a spouse, you begin taking distributions based on your life expectancy no later than December 31 of the year following the account holder’s death, or you must take the entire amount as a distribution no later than December 31 of the fifth year after the account holder’s death.

For more on inherited Roth IRAs see http://www.fairmark.com/rothira/inherit.htm