Is it distribution from traditional or Roth IRA?
In case of Traditional IRA, RMDs are taxed and, in the case of children under age 18 (or full-time students under age 24), they are taxed at a parent's usually higher rate.
Roth IRAs are a bit different, distributions from inherited Roth IRAs are tax-free. However, the beneficiary will still have to deplete the account within ten years after becoming an adult.
Typically, a child's tax rate is much lower than a parent's tax rate due to having much less income. However, certain types of income, including inherited traditional IRAs, are subject to the kiddie tax, are taxed at the parent's highest tax rate after a certain threshold amount ($2,200 in 2021). This applies to children who are under 18, or, if the child is a full-time student, children under 24.
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