Q: I have some questions regarding [an] inherited IRA. I have two sons and I would like to leave them equal amounts of my IRAs. In fact, I have that in my will. I am wondering: Supposing one decides to take the IRA as a lump sum, and the other one decides to roll it over into an IRA. I am wondering how that would play out.

–I.C., Pawtucket

A: First, consider establishing separate IRAs while you’re alive, said Marvin R. Rotenberg, a widely recognized expert on IRAs and other retirement plans. That way, there’ll be fewer complications.

So, tell the financial institution which serves as the trustee or custodian of your IRA that you want to split the IRA into two separate IRAs. Make one son the beneficiary of one; make your other son the beneficiary of the second, said Rotenberg, a director of Bank of America’s Personal Retirement Solutions group.

Thus, upon your death, the first IRA will go directly to your first son, and the second IRA will go directly to your second son, outside of the probate court process, Rotenberg said in an interview at his office in Boston.

That way, each son will be free to decide what to do with his IRA. For instance, one could make a lump-sum withdrawal; the other son could make required withdrawals over his life expectancy, stretching out the IRA’s life.

Two other important points that you raised in your question to MoneyLine:

•Wills: You mentioned that you’ve made arrangements in your will regarding your IRA. But a will does not control the disposition of an IRA, unless the IRA ends up being passed through to your beneficiaries via your estate, said Mark S. LaVangie, a Bank of America retirement specialist who works with Rotenberg.

If you name your estate as beneficiary of your IRA — or if you fail to name a beneficiary — the IRA will have to be processed through probate, and those to whom the IRA eventually passes will miss out on the chance to stretch out the life of the IRA.

Instead, make sure that you complete the beneficiary form for each IRA, and file the forms with the IRA trustee. With the proper forms in place, the IRAs will bypass the probate process and go directly to the beneficiaries you’ve named on those forms. Then, “Each beneficiary can choose what he wants to do” with the account he has inherited, LaVangie said.

•Rollovers: You mentioned that your second son may want to roll over the IRA he inherits, treating it as his own. But that option is available only to a spouse beneficiary. Instead, he should maintain the account as a beneficiary account. In other words, he should have his inherited IRA retitled so that it remains in the name of the deceased IRA owner and is for the benefit of him, as beneficiary.

For example, suppose that Maria Garcia dies on Dec. 1, 2007, and leaves her traditional IRA to her son, Ramon. To avoid immediate tax consequences, Ramon should tell the financial institution to rename, or re-title, his mother’s IRA this way:

“Maria Garcia IRA (deceased Dec. 1, 2007), FBO Ramon Garcia, beneficiary.”

This will identify the inherited IRA as a beneficiary IRA (“FBO” means “For the Benefit Of”), and the account will continue to be sheltered from immediate taxation.

Yes, Ramon will be required to make periodic withdrawals from the account. But he’ll have the option to withdraw just the minimum amount required, allowing the balance to continue to grow on a tax-deferred basis — building wealth all the while.

Q: I was reading your article on the . . . Narragansett Insured Tax-Free Income Fund. Would you tell me how I can contact that company? There doesn’t seem to be a phone number associated with it in the phone book, and I would like to know a little more about it.

–N.G., Cranston

A: Call toll-free at 1-800-437-1020, or use this Web site:

www.aquilafunds.com

The Narragansett Insured Tax-Free Income Fund is a particular type of municipal bond mutual fund.

In general, the fund uses shareholders’ money to buy Rhode Island government bonds. Interest that the fund receives on those bonds gets passed along to shareholders, in the form of dividends, which are generally free from federal and Rhode Island income tax for Rhode Island shareholders. (For shareholders in other states, the income is generally free from federal tax, not from state tax.)

The fund has about 1,900 shareholders and about $150 million in assets under management, a fund official said at the fund’s annual shareholders’ meeting last month in Providence.

The Narragansett fund is one of several “single state” municipal bond funds that focus on Rhode Island. In general, such funds are best suited for higher income taxpayers. (Lower income taxpayers generally may obtain a higher yield — even after taxes — through other means.)

Before investing, compare the funds, be sure to read each fund’s prospectus and statement of additional information, and consider obtaining professional investment advice.

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