IRA Distributions
Client owned three IRA’s all of which he never named a beneficiary for despite several requests. Therefore his beneficiary was his Estate (he had no natural heirs, just a sister and several neices and nephews). The sister was named Executrix of his estate and signed distribution forms in August indicating a 100% distribution with no withholding. In November she asked to have all of the money withdrawn and placed in her brorther’s Estate Account. We complied. In February she called and said she “got busy in December and didn’t realize she took it all out. That she never would have asked to have it all withdrawn.” We told her it was too late and there wasn’t much we could do. Are there any options that she could pursue as Executrix or post mortem to reduce her tax bite in one year and possibly straddle two tax years? Thank you for your help!
Permalink Submitted by Alan Spross on Fri, 2012-03-30 19:34
Nothing can be done about the 1099R reporting the full IRA distribution, and nothing can be done to roll over any of the amount distributed. Perhaps something can be done in selecting the initial accounting period for the estate 1041 such that the distribution is not included in the same period as other estate income. It should also be checked if all 3 IRAs were distributed in the same month or not.
Permalink Submitted by Bruce Steiner on Fri, 2012-03-30 21:21
She should consider the selection of a fiscal (or calendar) year for the estate, the timing of distributions (which generally carry out income), and the deductibility of the estate’s administration expenses (unless the deduction is more useful on the estate tax return).
She may wish to consult with tax/estates counsel (preferably someone other than the one who advised her or failed to advise her with respect to the IRA distribution).