It is generally not possible for an IRA to lend money to its own beneficiary.  However, the tax law allows an IRA to distribute assets to the beneficiary without consequence if the assets are "rolled over" into another IRA within 60 days.  Thus, the beneficiary gets the use of the money during that 60 day period.

There is no immediate tax if distributions from traditional IRAs are rolled over to an IRA or other eligible retirement plan.  A distribution rolled over after the 60-day period generally will be taxed (and also may be subject to a 10% premature withdrawal penalty tax).  Only one tax-free IRA-to-IRA rollover per IRA account can be made within a one-year period.

IRS may waive the 60-day rule if an individual suffers a casualty, disaster, or other event beyond his reasonable control, and not waiving the 60-day rule would be against equity or good conscience (i.e., hardship waiver).  Not having the money will not be a valid excuse.

A recent ruling illustrates how this works.  In the ruling, the Taxpayer, age 60, was responsible for paying two residential mortgages: one on a new house he bought; and the other on his former residence that had not yet sold. To meet those payments, Taxpayer withdrew cash from his IRA, with the intention of putting part of the withdrawal (Amount B) back into the IRA within 60 days. Taxpayer says he would have repaid Amount B to his IRA within 60 days had the due date for repayment not fallen on a date which was a bank holiday. He represented that although checks totaling Amount B were received by IRA personnel on the 60th day, they could not be deposited until the next day because of the bank holiday. Thus, Taxpayer said he failed to roll over Amount B within the 60-day period only because the due date for repayment fell on a bank holiday.

IRS said that the documentation showed that checks totaling Amount B were received by the custodian of Taxpayer's IRA on the 60th day after his original withdrawal from the IRA. However, due to the bank holiday, they were not deposited into his IRA X until the following day. Thus, the information and documentation were consistent with Taxpayer's claim that his failure to timely roll over Amount B was caused by the fact that the last date for repayment of Amount B under the 60-day rollover rule fell on a bank holiday. As a result, IRS waived the 60-day rollover requirement with respect to the distribution of Amount B from Taxpayer's IRA. Provided all other requirements are met, except the 60-day requirement, IRS concluded that Amount B, which was deposited into Taxpayer's IRA X, will be considered a rollover contribution.