Income generated by IRA in administrative estate
Client died on June 11th with an IRA that was left to her estate. Question 1 – RMD was paid 6/13 and payable to her SS#, can this still be reported on the admin estate return?
Question 2 – Is the income generated by the IRA throughout the year taxable to the estate, or is only the RMD taxable and the income remains tax deferred?
Permalink Submitted by Alan - IRA critic on Mon, 2017-11-20 17:26
If the check has not been deposited to the estate account, perhaps it can be re issued to the estate. Otherwise, the nominee process can be used in which the 1099R income is transferred to the estate. It would be reported as both income and also backed out of the client’s final return, then reported as income on the estate 1041. The only income taxable to the estate are distributions made to the estate or the nominee distribution. All income within the IRA remains tax deferred. The executor can usually assign the inherited IRA to the estate beneficiaries who can then decide to follow the RMD requirements (5 year rule if death prior to RBD or remaining LE of decedent if death after RBD) or accelerate distributions as desired. Some IRA custodians will push for a lump sum distribution, but their IRA agreement likely does not support that requirement.