Retitling of IRA after death of owner between estate and beneficiaries
Ex-wife decedent had an IRA with her ex-husband as beneficiary. The attorney of her Estate sued to have the IRA go to her estate. The court found in favor of the decedent’s estate 2 years later. No minimum distributions were made out of the IRA during the court proceeding. The decedent’s will named her 2 sisters as beneficiaries of the estate. The ex-wife had reached her required distribution date in a prior year and was receiving RMDs through the year prior to her year of death. The ex-wife’s estate had no other assets
Can the either of the following be done regarding the IRA
1. Retitle the IRA to the following:
– To the Estate equal to the portion that would cover the RMDs for the years where there were no RMDs plus income taxes and estate taxes to be paid.
– The remaining as inherited IRAS split among her sisters
or
2. -Retitle the IRA to the Estate and have the estate receive IRA distributions equal to the RMDs from previous years plus funds needed to pay taxes.
-After the estate is closed, retitle the remaining IRAs as inherited IRAS for each sister
Thanks,
Permalink Submitted by Alan - IRA critic on Thu, 2014-08-07 17:10
Yes, but either of those creates double work. Why not have the IRA assigned directly from the estate (or ex husband) to the beneficiaries of the estate, who can then make up the year of death RMD if applicable and the other delinquent years. Beneficiaries will have to pay the taxes anyway and this prevents having to pass the RMD income out of the estate on a K1. Each beneficiary will have to file a 5329 to request a waiver of the penalty for taking timely RMDs, but under the circumstances of the litigation, the IRS should approve the waiver. Beneficiaries will report all the income for the year they receive the delinquent RMDs. If the estate had no other assets, this will also avoid a 1041 estate return because there will be no estate income. Is the total estate large enough to owe estate taxes?