Inherited IRA (Estate as beneficiary)
T-IRA owner, > 70.5 died in 2015 naming estate 100% primary beneficiary
My understanding is the estate beneficiaries have the following options (1) mini-stretch using deceased’s remaining life expectancy assuming he lived, (2) 5-year payout or (3) immediate liquidation. correct?
The estate beneficiaries include two children and 2 separate trusts. I’ve been informed the beneficiaries are looking to commence the “stretch”
questions:
Does a trust beneficiary (of the estate) impact the stretch?
How do the mechanics work? I think the IRA owner (now the estate) would be pay out RMDs (based on the deceased life expectancy) to the 4 estate beneficiaries. In essence the estate would pay the trusts and individuals – correct? The trust and individuals would need to report the income (i.e. RMDs) as K1 income?
All help is appreciated.
Permalink Submitted by Alan - IRA critic on Wed, 2015-05-27 18:21
Of the 3 choices, the 5 year option does not apply because IRA owner passed after the RBD. If the executor assigns the inherited IRA to the estate beneficiaries and then terminate the estate, all such beneficiaries are subject to the same RMD using the single life table starting with the year of death age and reducing that divisor by 1.0 each year thereafter. After separate inherited IRA accounts are established for each beneficiary, only the trust beneficiaries will be receiving a K1. Note that the year of death RMD must also be completed by the beneficiaries if not completed by the owner.