Daughter passed,divorced,left no will.She worked and died in California.I,her father,live in Penna and am the next of kin.She had a retirement account set up with her employer.A check is forthcoming to me.What sort of income tax will I pay if her company dont take it out? I am retired and 71 years old on SS and Mil ret? Will there be an inheritance tax in Pa or Cal? I will split this check amongst three daughters who helped look after her.Thanks for any help in this matter.
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Daughter's death...
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Are these HER daughters? Are you named beneficiary on the account?Daughter passed,divorced,left no will.She worked and died in California.I,her father,live in Penna and am the next of kin.She had a retirement account set up with her employer.A check is forthcoming to me.What sort of income tax will I pay if her company dont take it out? I am retired and 71 years old on SS and Mil ret? Will there be an inheritance tax in Pa or Cal? I will split this check amongst three daughters who helped look after her.Thanks for any help in this matter.
Regarding taxes on the inherited retirement plan, typically your options should have been: roll it to an inherited IRA or lump sum to you as beneficiary.
If you roll it over into an inherited IRA, you will begin taking RMD's (required minimum distributions) over your lifetime since you are currently 71. Federal and State Taxes are based upon the amount of RMD which is added to your income tax as ordinary income. You can request a % to be withheld for taxes from the bank or brokerage firm when you set up your RMD.
You can withdraw as much as you wish over and above the RMD amount each year to distribute to your children. Any distributions will be considered ordinary income in the tax year in which you request it.
If you request a lump sum, then the full amount of the retirement plan balance is given to you. The company may ask you how much you want withheld, or will automatically take a percent (maybe 25%) for Federal taxes. This full amount of retirement plan balance will be added to your Federal & State taxes as ordinary income in the year of distribution. Any amount of taxes withheld will be credited toward your Federal tax payment. You can then freely distribute the funds to your children.
Since you are the beneficiary as stated, all taxes become yours to pay on the retirement plan funds.
As to inheritance tax, I will leave that to those who know that area better.
If you roll it over into an inherited IRA, you will begin taking RMD's (required minimum distributions) over your lifetime since you are currently 71. Federal and State Taxes are based upon the amount of RMD which is added to your income tax as ordinary income. You can request a % to be withheld for taxes from the bank or brokerage firm when you set up your RMD.
You can withdraw as much as you wish over and above the RMD amount each year to distribute to your children. Any distributions will be considered ordinary income in the tax year in which you request it.
If you request a lump sum, then the full amount of the retirement plan balance is given to you. The company may ask you how much you want withheld, or will automatically take a percent (maybe 25%) for Federal taxes. This full amount of retirement plan balance will be added to your Federal & State taxes as ordinary income in the year of distribution. Any amount of taxes withheld will be credited toward your Federal tax payment. You can then freely distribute the funds to your children.
Since you are the beneficiary as stated, all taxes become yours to pay on the retirement plan funds.
As to inheritance tax, I will leave that to those who know that area better.
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Nobody is named as beneficiary. That means the account is part of the daughter's estate. Estate creditors need to be paid first from estate assets before distributions to estate beneficiaries.Regarding taxes on the inherited retirement plan, typically your options should have been: roll it to an inherited IRA or lump sum to you as beneficiary.
If you roll it over into an inherited IRA, you will begin taking RMD's (required minimum distributions) over your lifetime since you are currently 71. Federal and State Taxes are based upon the amount of RMD which is added to your income tax as ordinary income. You can request a % to be withheld for taxes from the bank or brokerage firm when you set up your RMD.
You can withdraw as much as you wish over and above the RMD amount each year to distribute to your children. Any distributions will be considered ordinary income in the tax year in which you request it.
If you request a lump sum, then the full amount of the retirement plan balance is given to you. The company may ask you how much you want withheld, or will automatically take a percent (maybe 25%) for Federal taxes. This full amount of retirement plan balance will be added to your Federal & State taxes as ordinary income in the year of distribution. Any amount of taxes withheld will be credited toward your Federal tax payment. You can then freely distribute the funds to your children.PS-no one named on her retrement acct.
Since you are the beneficiary as stated, all taxes become yours to pay on the inheritance.
As to inheritance tax, I will leave that to those who know that area better.
Does daughter have any debts? Other assets )car, savings, checking, etc.)?
Just making a couple comments...
"Retirement account" is a very vague phrase. Without clarification form the OP, whether it can be rolled is open to question.Regarding taxes on the inherited retirement plan, typically your options should have been: roll it to an inherited IRA or lump sum to you as beneficiary.
It could be that the plan's provisions provide for beneficiaries in the absence of designated beneficiaries.Nobody is named as beneficiary. That means the account is part of the daughter's estate.
No assets.Her sisters took care of any indebtedness she had prior to and after her death.Nobody is named as beneficiary. That means the account is part of the daughter's estate. Estate creditors need to be paid first from estate assets before distributions to estate beneficiaries.
Does daughter have any debts? Other assets )car, savings, checking, etc.)?
Human Relations dept sent me a "Death benefit distribution request" and a form letter of explanation/guide.It explained that 10% Fed income tax and state income tax would be paid as appropriate. No mention of inheritance tax.I believe the company holding the acct is American Funds...Dont know anymore.Filled out request and returned.Thanks for your response.Regarding taxes on the inherited retirement plan, typically your options should have been: roll it to an inherited IRA or lump sum to you as beneficiary.
If you roll it over into an inherited IRA, you will begin taking RMD's (required minimum distributions) over your lifetime since you are currently 71. Federal and State Taxes are based upon the amount of RMD which is added to your income tax as ordinary income. You can request a % to be withheld for taxes from the bank or brokerage firm when you set up your RMD.
You can withdraw as much as you wish over and above the RMD amount each year to distribute to your children. Any distributions will be considered ordinary income in the tax year in which you request it.
If you request a lump sum, then the full amount of the retirement plan balance is given to you. The company may ask you how much you want withheld, or will automatically take a percent (maybe 25%) for Federal taxes. This full amount of retirement plan balance will be added to your Federal & State taxes as ordinary income in the year of distribution. Any amount of taxes withheld will be credited toward your Federal tax payment. You can then freely distribute the funds to your children.
Since you are the beneficiary as stated, all taxes become yours to pay on the retirement plan funds.
As to inheritance tax, I will leave that to those who know that area better.
Is this a 401(k)?
How much are you talking about?
Have you asked what happens if you decline? If that is possible, would her sisters be eligible to receive the benefits? (If your intention is to pass it along to her sisters, it would probably be more efficient to allow them to receive the funds directly.)
Assuming your daughter passed away this year.. There is no federal estate tax. CA does not have an estate or inheritance tax. PA inheritance would not apply since your daughter was a California resident. (The plan's administrators would not get involved in estate/inheritance taxes anyway.)
How much are you talking about?
Have you asked what happens if you decline? If that is possible, would her sisters be eligible to receive the benefits? (If your intention is to pass it along to her sisters, it would probably be more efficient to allow them to receive the funds directly.)
Assuming your daughter passed away this year.. There is no federal estate tax. CA does not have an estate or inheritance tax. PA inheritance would not apply since your daughter was a California resident. (The plan's administrators would not get involved in estate/inheritance taxes anyway.)
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