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I'm trying to wrap my head around the tax implications of Roth IRAs.

I have a husband, who I assume will predecease me. If he doesn't, I understand his options (delaying payments till I would be 70 1/2 or treating it as his own).

I also have one young adult son. He's my beneficiary should both myself and my husband die.

I'm reorganizing my finances, rolling a few stray 401k accounts from old employers into Traditional IRAs, possibly rolling those over into ROTH IRAS, etc. As part of this I'm considering the potential future where my son may inherit the balance of these accounts (assuming I either die early with my husband, or I don't spend down the balance in retirement).

Someone else on the fool boards pointed me to IRS publication 590, and I read through it. It seems pretty straight forward, except for two points.

1) It says that when the Roth owner dies, the heirs must either take an annuity within one year or the entire balance within five years.

2) It says when the Roth owner dies, the minimum distribution rules that apply to Traditional IRAs apply to Roth IRAs as if the owner died before the beginning date, as per another section. Reading that section states there's an "additional" 10% tax that applies to any withdrawals before 59 1/2.

On page 37 it says that distributions from Traditional IRAs are taxable the year they're paid.

What I don't know is the tax implications for taking these distributions. Say I have a balance of 100K. If my son takes the entire balance in the first year, does his income increase by 100K? Does he pay taxes on whatever he earned normally, plus a 100K income boost, plus an additional 10% on the 100K portion?

If the above is correct, since it says he can take it over 5 years, is it an option to split it up into 5 payments of 20k and soften the tax blow a bit?

Or, am I misunderstanding? I have read several times that Roth IRAs are a great way to pass assets onto adult children. Depriving your children of your company by dying and then creating a tax tangle seems particularly cruel.
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