pass through from one IRA to 4 IRAs
Hi,
we have a client that wants to distribute the assets from his IRA to 4 new IRA accounts all in each of his 4 siblings. They need to be pass through. is that possible? I think the answer is that this client can do a distribution and give a some to each sibling but with their knowledge that it is going to be a conttribution. what is the right answer?
Permalink Submitted by Alan Spross on Tue, 2009-11-10 23:25
I assume your question considers that the siblings will not be IRA beneficiaries, but receive a current gift of IRA assets. Since an IRA cannot be transferred during life (except for a divorce settlement), a taxable distribution would have to be taken, and the proceeds gifted to the siblings subject to gift tax rules. The funds could not remain in an IRA of the siblings unless the siblings qualified for a regular contribution through their own earned income and used the gift to subsidize that contribution.
Siblings might also choose to convert their own IRAs to a Roth and use the gift to pay the taxes on the conversion. That way, they end up with a Roth IRA, which is more valuable that a TIRA.