Doing some research today I found a great chart produced by the IRS which highlights your options when a spouse or non-spouse inherits an IRA or other qualified Account.
Two Examples of RMDs Gone Wrong with an Inherited IRA
For example, if you name your spouse as beneficiary and no contingent beneficiary and your wife passes away what would happen? Your estate would be beneficiary and look above! The IRA will have to be distributed within 5 years, instead of the 30 or 40 years your children may have been able to defer taxes until.
Another example would be if you name your surviving spouse and she survives you opting to make it her own IRA. What then occurs if she needs money and she is not yet 59 1/2? 10% penalty!
Choosing how to handle an inherited or beneficiary IRA is something that must be researched and taken seriously.