Withdrawal

• An IRA can be shut down via revocation of account custody and withdrawal of funds. If the original owner has reached the age of 59 1/2 years, the money is not subject to an early withdrawal penalty. Traditional IRA qualified distributions are subject to income tax in their entirety even past the age of 59 1/2. This is because the IRA was originally funded with pretax dollars. Roth IRA contributions, but not earnings, are not taxable upon withdrawal because the original contributions were made with after tax dollars.
  
  

Rollover

• An IRA account can be shut down when it is being rolled over into another IRA. For example, according to the IRS, Roth, Traditional, SIMPLE and SEP IRAs can be rolled over into a new IRA. If the IRA is transferred directly by the account's trustee or account custodian after completing a rollover transfer form, no withdrawal penalty is charged. If IRA funds are indirectly rolled over by the owner, they must be redeposited into a new retirement account within 60 days to defer taxation.
  
  

Dissolution

• IRAs that have been apportioned through marital dissolution, judicial divorce decree or inheritance may be legally required to shut down and transferred to new owners. IRS Publication 590 states in the event of owner death, IRA funds distributed to non-spousal beneficiaries must be allocated within five years unless a trustee-to-trustee transfer takes place. This means the IRA must be placed into a new IRA directly by the institution managing the IRA in order to avoid tax and mandatory distribution.
  
  

Trusts

• Sometimes an IRA is shut down by payment into a trust, a financial estate-planning instrument. In such a case, a trustee becomes responsible for carrying out the terms of the trust. However, according to JFL Consulting, an executive compensation and employee benefits advisory firm, beneficiaries may receive IRA assets regardless of what a trust authorizes unless the beneficiary is a trust. JFL Consulting also points out a transferred IRA must be held in the name of a person or primary trustee even if owned by a trust.