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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4046
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My Mother passed away recently. Her estate includes a small

Resolved Question:

My Mother passed away recently. Her estate includes a small IRA (approximately $24,000). Do we avoid paying taxes on the funds if we roll our share (I have 2 siblings and we are each designated beneficiaries) into an IRA in our individual names?
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Customer:

Alright.

Stephen E. Grizey :

You won't be able to roll over your shares of your mother's IRA. Only a surviving spouse can do that; however, you should have 5 years to take your funds out of her IRA so you could each spread out your distributions over that time period; the other alternative, which probably isn't worth it given the size of the IRA would be to take your distributions out over your lifetimes or the oldest of the 3 of your lifetimes, I forget which. Also, had your mother begun taking her minimum distributions before she died? If so, the rules change in that case also.

Customer:

My Mother was 78. I do not know if she had started taking out minimum distributions. If she had, what are the implications then?

Stephen E. Grizey :

She would have had to been taking them out each year beginning on or before April 1st of the year following the year she turned 70 1/2.

Stephen E. Grizey :

Let me check on your last question; what are your ages?

Customer:

My younger sister has been handling my Mother's financial affairs since 2008. She does not have a good head for money and I do not know if she would know. I am 57. My sisters are 54 and 52.

Stephen E. Grizey :

She would know what? Your mother would have been taking her distributions as if she wasn't, the penalties would wind up taking the whole fund before you were through; the custodian would have been after her to do so when she had to take her distributions;

Customer:

I was just saying that if anyone other than my Mother knew whether she was taking minimum distributions it would be my younger sister. I am not sure she would remember whether Mother was taking minimal distributions.

Stephen E. Grizey :

The custodian will have all that information.

Customer:

By custodian, you mean the institution where the account is held? That would be Bank of America.

Stephen E. Grizey :

If you and your sisters are going to spread out your withdrawals from the IRA, you'll have to have it split 3 ways & retitled in your mother's name such as "XXXXX XXXXX, deceased, inherited IRA for the benefit of "each sister", beneficiary and then you can take the distributions over your lifetime. You will all have to designate beneficiaries of each IRA account.

Stephen E. Grizey :

Given the size of the IRA, by the time you go through all this paperwork, annual fees, etc., you might as well just get the IRA distributed;

Stephen E. Grizey :

In any case the 5 year rule doesn't apply & you have to start taking out funds by 12/31 of the year following the year your mother died.

Stephen E. Grizey :

The bank can explain all of your options to you based upon your mother's IRA.

Customer:

Thank you for explaining this so I can point my younger sister in the "right" direction (she is the estate Executor).

Stephen E. Grizey :

Actually the executor doesn't control the IRA

Stephen E. Grizey :

the beneficiaries do

Stephen E. Grizey :

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If you'd like to contact me again, in the future, just ask for "Steve G" at the beginning of your question.

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4046
Experience: Extensive Experience with Tax, Financial & Estate Issues
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