ESTATE WITH IRA

Submitted by J W EVICH on Thu, 2023-09-07 22:39

I am the PR for an estate in FL. The deceased died in Jan 2023 before taking the RMD from his IRA which had no beneficiaries. There was a will which states all divided equally. I have received the RMD into the estate.
The question relates on to handle the balance in the IRA which is with Fidelity. There are 3 heirs and no spouse or ex spouse Can I have Fidelity just distribute the the account three ways from a probate order per the will OR does the IRA have to be liquidated into the estate?

If it is liquidated, I assume this is all income to the estate which which then would require the estate to file form 1041.



Submitted by Alan - IRA critic on Thu, 2023-09-07 23:11

  • FIdelity should allow you to assign the IRA out of the estate to the estate beneficiaries as inherited IRAs. They can then manage their own inherited IRAs, transfer them to another custodian if they wish, name their successor beneficiaries, etc. This will allow you to close the estate without a lump sum distribution. The distribution of inherited IRAs will not be income to the estate, but you will have to file at least one 1041 anyway, due to the distribution already made to the estate. This does not affect the beneficiary RMDs, which must be made over the remaining LE of the decedent which is of course much more tax efficient than a lump sum distribution.
  • The year of death RMD could have been taken by the beneficiaries after assignment, but you can use the distribution to pay estate expenses, and distribute the remainder to the beneficiaries on a K1 with Form 1041.

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