You can't transfer money directly from an IRA to a child.
Your dad can't transfer the account directly, says Ed Slott, publisher of Ed Slott's IRA Advisor newsletter; he could, however, take out all he wants, pay any taxes due, and then hand out the money.
His withdrawals from a traditional IRA, other than nondeductible contributions, would be taxed as ordinary income; Roth IRA withdrawals are tax-free if the account has been open for five years.
Unless the kids need cash urgently, it's better to name them as beneficiaries.
Upon your dad's death, a child can keep the assets growing tax-deferred in an IRA, taking mandatory minimum distributions based on life expectancy. Money from a traditional IRA is taxable; inherited Roth money generally isn't.
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