when a parent dies with an ira

[TrustUser]

is the child required to inherit the whole amount that year ? or can the child take annual amounts that may not raise their tax levels ?

 

[adjusterjack]

See Page 6 of IRS Publication 590b

2020 Publication 590-B (irs.gov)

More at

Retirement Topics - Beneficiary | Internal Revenue Service (irs.gov)

 

[LdiJ]

is the child required to inherit the whole amount that year ? or can the child take annual amounts that may not raise their tax levels ?

The following explains it pretty well. You have to scroll down to get past the spousal inheritance part. You inherit the entire IRA in the year that your parent passes away. You have options as how to take distributions. Distributions are the taxable part.

Inherited IRA Rules: Distribution and Beneficiaries | Charles Schwab

 

[TrustUser]

thanks ldj, i think without doing anything at all, my nephew should be eligible to do the 10-year route. there isnt enough in the ira that 1/10 of it is gonna do much damage to his income tax for that year.

 

[adjusterjack]

Make sure he's listed as beneficiary on the IRA, keep a copy of the form that you fill out, and check ever few years to make sure he's still on record with the IRA.

I have found that beneficiary designations some times get lost so it's something you'll want to make sure stays up to date.

 

[TrustUser]

thanks aj, the credit union did give me a beneficiary form, but i dont know if my sister is well enough to sign it. i need to talk to the credit union, and see what happens to the acct, as of the moment. i suspect that my sister could take money out, tax free - cuz her income isnt high enough. but she is sorta past the point of dealing with things at all. i am doing what i can, but i can only control those things that are within my control. it isnt a huge amount, but it could certainly help my nephew out, such that i would prefer to see him keep it all, if possible

 

[adjusterjack]

Does your sister have a will?

 

[TrustUser]

no, she has a trust. but her house is not yet in the trust. her bank acct is.

 

[adjusterjack]

i dont know if my sister is well enough to sign it

That raises a question. Is she mentally competent to sign anything, make a will, deed the house into the trust?

The time to do all that is while she is alive or you'll have an expensive mess on your hands when she dies.

 

[TrustUser]

yes, you are correct. she can probably be mentally competent. it is very hard to describe actions, when they do not have rational explanations. she is very difficult to work with. until and unless you deal with someone like that, you wont get it - LOL

 

[adjusterjack]

yes, you are correct. she can probably be mentally competent. it is very hard to describe actions, when they do not have rational explanations. she is very difficult to work with. until and unless you deal with someone like that, you wont get it - LOL

I get it. I was married once and then got divorced. LOL back atcha.

Anyway, if you cannot inculcate the need for proper estate planning, study up on probate laws and procedures to prepare for intestacy. If your nephew is an adult when she dies, he would be the one to step up and be appointed representative of the estate, though he can allow you to volunteer if you both agree that you are more capable.

Are you the trustee of her trust? Or is her son? Somebody else?

 

[TrustUser]

my sister and i are both trustees. so i have current access to her bank account, and her ira account. i hope we can get her house in trust. then her estate would just consist of the ira acct, which would probably pass thru the small estate procedure, or whatever they call it in california.

i need to check with the credit union, just what happens to her ira acct. i hope it will pass just to her savings acct, so nothing else needs to be done. her savings, checking, and ira acct all start out with her credit union member number.

i AM NOT gonna be the appointed representative. my nephew can deal with that. he is already an adult, by a long ways.

i dont want to be the trustee, either - but i already volunteered, so i will do so.

 

[TrustUser]

it might be best to have it pass directly to him, as well. it is a taxable item, that my nephew is gonna have to deal with, based upon his individual taxes. from what was revealed earlier, he should have 10 years to claim it all.

 

[adjusterjack]

then her estate would just consist of the ira acct, which would probably pass thru the small estate procedure, or whatever they call it in california.

I'm not completely sure about this but I think, in the absence of a beneficiary on the account, the money would be paid to "The Estate of......" and would have to be probated. It would also be reported to the IRS as a taxable distribution.

Check with a tax pro about that.

 

[TrustUser]

i sorta figured that. i guess like doris day once said, que sera sera !!

thanks for your input