IRA-BDA
Mom died and named daughter the IRA beneficiary
Daughter died a week later, before she could name
a beneficiary. (she lives out of state and had not signed
the form yet)
IRA went thru probate and is now 100% her brothers.
Can he take withdraws over 5 years or does he have
to take it all in year 1?
Permalink Submitted by Alan - IRA critic on Mon, 2022-03-14 18:23
What year did Mom pass? Has daughter’s executor now assigned the IRA out of her estate to brother so that brother is now named as the beneficiary of daughter for the inherited IRA?
Permalink Submitted by David Garrison on Tue, 2022-03-15 17:24
Mom and Daughter both died in 2021. IRA has not been assigned to brother- yet. IRA was just recently cleared thru probate. I was waiting on how to title IRA and the answer to thw 5 year withdraw rule. Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-15 22:03
The beneficiary RMD is determined by the designated beneficiary, in this case the 10 year rule. The death of daughter prior to 9/30 of the following year does not change this, therefore the estate of daughter is entitled to complete the 10 year rule, as would brother if assigned the inherited IRA out of the estate so the estate could be closed. I am guessing that Mom passed after her RBD, and therefore under the new proposed Regs, there would be annual life expectancy RMDs based on daughter’s age that would have been attained in 2022 for the first 9 years and the remainder distributed in year 10 (2031). If mother passed prior to RBD, the 10 year rule would apply without annual RMDs. Finally, if Mother was subject to RMDs in 2021, the daughter’s estate is responsible for completing that year of death RMD even if not done until 2022. It is possible that the IRA agreement contains more retrictive provisions than this, so check the agreement.
Permalink Submitted by David Garrison on Thu, 2022-03-17 15:54
Last question- If we leave the account in the Estate Tax ID, it will get taxed at the Estate Tax Rates, which ramp up pretty quick.His Personal Tax rates are lower than the Estate Tax rates- so should he go ahead and take money as a lump sum, pay the tax and call it good?
Permalink Submitted by Alan - IRA critic on Thu, 2022-03-17 18:25
Distributions to the estate that are passed through to the beneficiary on a K1 are taxed at the beneficiary’s personal tax rate, but if a full distribution is made to the estate and the IRA balance is high, the beneficiary personal tax rate will also spike. The decision would be heavily weighted on the IRA balance and how cooperate the IRA custodian will be with assignment of the IRA out of the estate to an inherited IRA for brother.