Inherited IRA – estate
I have a client whose grandson died without a beneficiary on his IRA. Her grandson was 21 and didn’t have a will. We set up an Inherited IRA estate account as instructed. We took a distribution from the IRA and moved it into an estate account at the bank. The estate tax ID is on both accounts. The money was still in the bank on 12/31/24. I have two questions.
– Since the money was in the bank, does my client just complete a Form 1041?
– My client wants to make distributions to her granddaughter. Once she does, will it be an estate tax return (1041) and a K-1 that her granddaughter needs to include on her return?
Permalink Submitted by Alan - IRA critic on Fri, 2025-03-07 13:40
The IRA was distributed and taxable to the estate, but maybe not if this was a Roth IRA. The estate should have a received a 1099R for the amount of the distribution and will have to file a 1041 if gross income was $600 or more.
Distributions from the estate account other than to pay estate costs should only be made to the estate beneficiaries under state intestate law. There may be other relatives with priority, such as the children (if any) or parents. Whoever receives the distribution will get a K 1 to report the income.