Inherited IRA
I have a client who recently passed away at age 76 without a Will.
He was in a car accident 15 years ago and suffered significant brain injury/memory loss and was declared incompetent.
That same year his mom passed away. He was the only beneficiary of her Will.
An 867 Management Trust was established for the sole benefit of the client with the mom’s estate assets as well as an Inherited IRA.
Client has two adult children and one of them was appointed Administrator of the Estate.
What are the options for transferring the IRA assets to the Estate?
Do we sell the securities in the client’s IRA and then transfer the cash to the estate or transfer the securities of the IRA in kind to an inherited IRA account for the Estate ?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2024-08-22 17:40
I am not clear on the IRAs. Did client have his own IRA on which he failed to list a beneficiary, or did his mother also have an IRA that he inherited from her?
If the former, an inherited IRA must be established by his executor for his estate. If distributions are to be made, the holdings should be sold in the IRA, and then cash distributed to the estate as needed, which can be used to pay final expenses, medical, taxes, funeral costs, executor fees etc. Part of that distribution would be applied to his final RMD if he did not complete it. If the estate expenses do not exhaust the IRA balance, the executor may be able to assign the remaining balance to his intestate beneficiary(s) of his estate.
While the securities could be distributed to the estate in kind instead of cash, it is more efficient to sell in the estate because the executor would probably prefer cash.
Permalink Submitted by Katie B. on Thu, 2024-08-22 17:46
Thank you!
Client inherited the IRA from his mom the year he had the accident and the 867 management trust was established for his benefit.
Permalink Submitted by Alan - IRA critic on Thu, 2024-08-22 18:13
OK. Did Mom name him personally as her IRA beneficiary or this trust, which I suppose was a supplemental needs trust designed to protect his govt benefits from recovery? Was TX the applicable state?