Estate as IRA Beneficiary & Form 8606

Submitted by Thomas Sutkins on Tue, 2024-07-16 12:03

Decedents final 1040 reflected a nontaxable basis of $40,000 on his form 8606.

His estate contained three Traditional IRA’s as reflected on his final 8606 with a total date of death value of $55,000. Each IRA having a named beneficiary as follows.

IRA 1 Named Beneficiary of this IRA is Son number one, DOD Value $10,000

IRA 2 Named Beneficiary of this IRA is Son number two DOD Value $25,000

IRA 3 Named Beneficiary the decedents Estate DOD Value $20,000

Question.

Can the decedents estate receive its proportionate share of the 8606 basis? If so, does the estate file its own inherited 8606 with its form 1041 in the year the distribution is paid to the estate? I presume that the two sons will each receive their proportionate share of basis on their inherited form 8606 based on the total value of all three IRAs. How does the Estate handle its proportionate share of basis?

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Permalink Submitted by Alan - IRA critic on Tue, 2024-07-16 15:04

Each son and the estate inherit a proportional share of the basis remaining as of the date of death. And each beneficiary including the estate will have to file Form 8606 for any years in which they take a distribution. You are correct that the basis must flow proportionately to all beneficiaries, not selectively.

Should the estate not need to fully distribute the inherited IRA, the executor should be able to assign it out of the estate to the estate beneficiaries.