Nobody can make you inherit an IRA. If you're named as beneficiary, you have the option to disclaim some your inheritance. Some beneficiaries do this because they know the contingent beneficiary needs the money more. If you accept the inheritance -- even just to withdraw the money and give it to someone else -- you'll pay tax on the withdrawals. With a disclaimer, on the other hand, you never own the money so you never pay tax on it.
You don't have to decide immediately if you want to disclaim the account. If, say, you inherit a $10,000 IRA and aren't sure whether you want to disclaim it, you have nine months from the owner's death to act. During those months, you can't tap the account. If you take a withdrawal or rollover from the IRA, the IRS assumes you accept your inheritance and disclaiming it stops being an option.
There's one exception to the rule about not taking any money from the inherited account. When an IRA owner turns 70 1/2, she has to start making required minimum withdrawals every year. If you inherit from someone who's reached that age and she didn't make her RMD for the year before dying, you have to do it instead, paying tax on it as a withdrawal. This doesn't affect your right to disclaim. Use the IRS life-expectancy tables in Publication 590 to figure the right RMD.
Disclaiming is pretty simple. Send a written statement to the IRA administrator stating that you irrevocably, unconditionally disclaim your right to the IRA, or to some portion of the account. You have to do this within nine months of the death, unless you're underage. In that case, you can wait until nine months after you turn 21, provided you don't tap the money any sooner. You can't undisclaim your inheritance, so be certain you're making the right decision.
Once you disclaim the IRA, the administrator notifies the contingent beneficiary. Everything you disclaim now goes to him. If you retain any of the IRA assets for yourself, you handle them like any other inherited IRA. If you're a spouse, you can treat the assets as if you owned the account, keeping them there until retirement. Non-spouses have to transfer the assets into a beneficiary IRA and taking distributions according to IRS rules.