Thinking about long term estate planning, I don’t understand how the following case works.

My parent lives with me. I pay all normal expenses. Their only income is Social Security which pays for Medicare, but that will stop at death, leaving no assets — no savings, no house, no car, no furniture. But they have a $15,000,000 Roth IRA with all 5 children sharing equally as beneficiaries. (Roth so no RMDs)

The parent may or may not have even been filing income taxes, since for a small enough Social Security benefit, there would be no taxes due, and hence no requirement to file income taxes.

So when he dies, no probate. The IRA is automatically distributed by the brokerage to the beneficiaries.

But since the IRA is part of his taxable estate, and exceeds the $11M estate limit, $4M will be taxable, at 40%, so about $1.6M in estate taxes due.

But where does the tax money come from?

The estate (as an entity) has no funds — the IRA passes straight to the beneficiaries.

If the IRA is split into 3 pieces and kept at 3 different brokerages, no one of them would see anything over the $11M limit. The beneficiaries get $3M each which is less the $11M limit (and if some children were from one marriage and others from others, they may not even know of each others existence or how many there are).