#1) There is no 60 day period in which you can deposit these funds back into an inherited IRA account if you have already taken the distribution in full. There is also no such thing as a "rollover" in this case, because you can not continue to contribute to an inherited IRA. The IRS does not allow such things for this situation. So, if your hubbster has the cash already, it is considered that he has taken possession and the IRS looks at this in the same way as if he had gotten a $12,000 raise. He (you both) owe taxes on it at your top marginal rate. Just to be clear, the 60 day period applies when transferring an IRA and/or doing a rollover of a 401(k) (and a 403(b) for that matter). You can cash out a 401(k) and get a check, but as long as the funds are placed into another tax deferred account within 60 days, no 'material possession' has taken place. Typically one would simply do a rollover and never see a check. Again the above last two sentences do NOT APPLY to inherited IRA's
#2) Ideally, a separate "Inherited IRA" account is set up for each beneficiary that will receive the funds. The title name of the account can vary depending on custodian, but a typical one would read something like "John Smith IRA (deceased 11/27/09) F/B/O John Smith, Jr., Beneficiary” where "F/B/O" stands for "For the Benefit Of". If there was say...4 kids and the account was $100,000 to be split evenly then each new account gets $25,000, right? The IRS is very specific about what MUST happen to those funds once they settle into the new IRA's. Keep in mind there is no obligation to sell securities either. In other words, any stock, bond or Mutual Fund position or any other securities do NOT have to be sold unless, in the case of Mutual Funds, the custodian of the new accounts does not have a service agreement with the particular Mutual Fund company(s). Fidelity may not deal or have an agreement with Dodge and Cox or Oppenheimer, as a hypothetical example. Securities only need to be sold to satisfy the Required Minimum Distribution rules (RMD's)
#3) The way to handle it such that the taxes are spread out is to either a) take the RMD's required (As Progree indicates he is doing above) OR b) take distributions over a 5 year period. Either way, you owe taxes on the money.
RMD rules per the IRS;
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
IRS pub 590-B
https://www.irs.gov/publications/p590b#en_US_2016_publink1000230542
Look at the section titled "What if you inherit an IRA - Inherited from someone other than a spouse"
Hope that clears a few things up.
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