Question About Deceased IRA's

stormtracker

Guru
1000 Post Club
Mother in law passed away recently and had several IRA's which need distribution to her surviving children. What are the options for distribution and the tax ramifications? Thanks, as this is not in my area of expertise.
 
Mother in law passed away recently and had several IRA's which need distribution to her surviving children. What are the options for distribution and the tax ramifications? Thanks, as this is not in my area of expertise.

It's been 5 yrs since I was on top of things in this area, but probably still in place. They have 3 options, with option #3 being the best option:

1. Lump sum taxable distribution within I think 1 yr of death
2. Distribution over 5 year time frame.
3. If younger beneficiaries were listed directly as the primary beneficiary, or were bene's of the irrevocable trust that was named as the primary bene of the IRA, the beneficiaries can take it out over their own life expectancy and spread out the taxable events over their lifetimes.
4. If Mom in law was over age 70 1/2 and started RMD's already, you may have to continue the schedule if set up as Non Recalculation was chosen. If Re-calculation was chosen, see #3 above.
 
It's been 5 yrs since I was on top of things in this area, but probably still in place. They have 3 options, with option #3 being the best option:

1. Lump sum taxable distribution within I think 1 yr of death
2. Distribution over 5 year time frame.
3. If younger beneficiaries were listed directly as the primary beneficiary, or were bene's of the irrevocable trust that was named as the primary bene of the IRA, the beneficiaries can take it out over their own life expectancy and spread out the taxable events over their lifetimes.
4. If Mom in law was over age 70 1/2 and started RMD's already, you may have to continue the schedule if set up as Non Recalculation was chosen. If Re-calculation was chosen, see #3 above.

1-3 look good (the trust must be properly structured though to allow stretching the IRA).

If RMDs had already started, it is the longer of her remaining life expectancy OR the bene's life expectancy determined in the year following death. There are no recalcs in stretch...just take the factor and subtract 1 each subsequent year.

And I agree...option #3 is normally the best choice (short of the bene actually needing the money).
 
Back
Top