MMC Benefits Handbook
If your Beneficiary is your surviving spouse, your spouse may choose to have a direct rollover of your account to a traditional IRA, Roth IRA to an eligible tax-qualified employer plan, or paid to him or her. If the distribution is paid to a traditional IRA, Roth IRA or to an eligible employer's tax-qualified plan, taxes will not be withheld. If the distribution is paid to your surviving spouse directly, 20% of the taxable amount will be withheld for mandatory Federal income tax withholding.
If your beneficiary is someone other than a surviving spouse, your non-spousal beneficiary can request a direct rollover to a traditional IRA or Roth IRA. The traditional IRA that receives a direct rollover is considered an "inherited" IRA. The required minimum distributions from an "inherited" IRA are not based on the age of the beneficiary. Instead, complex rules apply that take into account the participant's age at death. Any distribution of amounts that are eligible for rollover but are paid directly to your non-spousal beneficiary will be subject to 20% mandatory Federal income tax withholding on the taxable amount.
The distribution made on account of your death is generally not subject to the additional 10% Federal early withdrawal tax.
A tax professional should be consulted to find out exactly what taxes your beneficiary will have to pay.