options when estate is beneficiary of IRA
if an individual dies and leaves the estate as beneficary of his IRA and his will leaves everything to his mother (deceased was not married), can the executor of the estate request that the IRA be transfered to mother as inherited IRA and if so, what distribution options does she have? (IRA owner was age 55 at death)
Permalink Submitted by Alan Spross on Fri, 2012-10-05 20:37
Yes, the executor can request that the IRA be assigned to the estate beneficiary. The estate can therefore terminate in the usual time frame.
Since the IRA owner passed prior to his required beginning date with an estate beneficiary, the 5 year rule applies and there are no other options. Under that rule, there are no IRA distributions required in any year, but the account must be drained by the end of the 5 th year following the year of the owner’s death. In this situation, the IRA can be assigned from the estate to the mother before any distributions are taken.
His mother may want to take out 20% per year or counting the year of death 1/6 over 6 different calendar years. That will help avoid an increase in her tax bracket which could occur if she distributes the inherited IRA as a lump sum.
Permalink Submitted by Bruce Steiner on Sun, 2012-10-07 00:54
If the estate selects a fiscal year, it’s possible to spread the IRA benefits over 7 taxable years.