Since the beginning of 2007, non-spouse beneficiaries who inherit a 401(k) account have been allowed to create special "inherited IRAs" for the money. If you're a non-spouse beneficiary, this means you don't have to pay tax on the money, which can continue to grow tax-deferred in your new IRA. Before this rule change, many 401(k) plans required non-spouse beneficiaries to withdraw all the money -- and pay income tax on it -- within five years of the death of the previous owner.

There are important rules to follow if you want to roll an inherited 401(k) plan into an IRA. If you don't follow them, you'll end up paying tax after all. Here are the key requirements:

• Non-spouse beneficiaries cannot transfer 401(k) funds into existing IRAs; you must instead set up a new "inherited IRA."
• The trustee of the 401(k) plan must transfer the money directly to the new IRA.

If you take the money, then turn around and put it into an IRA, you'll have to pay income tax on the amount. You will have to make required minimum withdrawals from the IRA, even before you reach retirement age. The withdrawals are based on your own statistical life expectancy, as determined by IRS tables.