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Multiple IRA beneficiaries

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mcochran

Junior Member
What is the name of your state? Texas

My sister named our father as her IRA beneficiary; he pre-deceased her. She left no will, so my brother and I inherit equally from her estate.

The problem is with her IRA. I understand that as she had not retired, the money will be taxable as income on disbursement. The company holding the IRA tells me it cannot make disbursements to more than one person. Therefore if either of us takes the money, we will also take the full income tax hit!

This doesn't sound right to me; there must be some way of dividing an IRA between parties fairly.

We are all residents of Texas, including the deceased if that makes a difference.
 


LdiJ

Senior Member
mcochran said:
What is the name of your state? Texas

My sister named our father as her IRA beneficiary; he pre-deceased her. She left no will, so my brother and I inherit equally from her estate.

The problem is with her IRA. I understand that as she had not retired, the money will be taxable as income on disbursement. The company holding the IRA tells me it cannot make disbursements to more than one person. Therefore if either of us takes the money, we will also take the full income tax hit!

This doesn't sound right to me; there must be some way of dividing an IRA between parties fairly.

We are all residents of Texas, including the deceased if that makes a difference.
I suggest that the executor of your sister's estate tell the company holding the IRA to dispurse it to your sister. That way the taxes on it can be part of her final tax return, and the two of you can simply divide the after tax amount.
 

Snipes5

Senior Member
When they do this, make sure they properly code the 1099, so there is no penalty.

I have never heard of them being unable to disburse to two people, it sounds to me like the bank is too lazy to figure out how to do it.

Snipes
 

abezon

Senior Member
Tell the bank to split the IRA into 2 IRAs. Then each beneficiary decides when & how much to withdraw from their IRA. If the bank can't figure out how to do that, transfer the account to a firm that knows what it's doing. Beneficiaries can keep the money inside the inherited IRA as long as they want (except for minor required minimum distributions). If the account is really a pension fund, beneficiaries have 5 years to get the money out.

Cashing in the IRA now will not put that income on the decedent's return: it will go on the estate's 1041 income tax return, then to the beneficiaries via a K-1.
 

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