IRA beneficiary (estate)
All,
I am looking for help with the mechanics when the estate is named as sole primary beneficiary of an IRA. Whereas I am familiar with the payout rules – I am requesting operational guidance.
For example:
T-IRA participant dies before their RBD. My understanding the beneficiary (of the estate) has two options (1) full liquidation or (2) 5-year pay-out
How is the inherited IRA re-titled? Under the Estate’s EIN # or the SS# of the beneficiary (of the estate?)
Assuming option 2 – does the estate need to remain open the entire pay-out period (5 years post-death)?
Reporting. Is a 1099-R generated associated with the Estate’s EIN? or the beneficiaries SS#?
Assuming the IRA owner died past their RBD – does this impact the reporting?
Thank you in advance!
Permalink Submitted by Alan - IRA critic on Thu, 2014-07-17 15:36
The 5 year rule would apply, but the estate or the beneficiary the estate assigns the IRS to can elect any distribution pattern as long as the account is drained at the end of the 5 year rule period. This could include distributions in some years and not others. The IRA is titled showing the estate as beneficiary and estate EIN unless the estate assigns the IRA to the beneficiaries of the estate at the same time as re titling the IRA. In that case the IRA could be set up showing the estate beneficiary and SSN as beneficiary. Each institution will have it’s own requirements on how this is done. The estate will usually be closed long before the 5 year period expires and the IRA assigned to the estate beneficiary, but still subject to the 5 year rule payout requirement. The 1099R will be issued to the entity that the distribution is paid to according to the IRA registration at the time of distribution. If owner passes after the RBD the above procedures still exist except that the life expectancy of the decedent is used for RMDs in lieu of the 5 year rule. See this article and it’s links: http://www.ataxplan.com/bulletinBoard/ira_providers.cfm