Hi and welcome to Just Answer!Under whatever payout scheme is applicable due to RBD
If the IRA owner died on or after the required beginning date (RBD) for distributions, an RMD must be distributed for the year of the owner’s death. If the IRA owner already took some distribution before the death - that amount is counted for RMD.
This requirement applies only if the account owner died on or after the RBD. If the IRA owner died before the RBD, there is no RMD which must be distributed for such year. If the IRA owner did not designate a living person as a beneficiary and died before the RBD
, then the estate is required to use the 5-year rule.If the IRA owner did not designate a living person as a beneficiary and dies on or after the RBD
, then the applicable distribution period (i.e. the original factor) for years after the year of death is based on the IRA owner’s age and life expectancy as determined of Dec 31 of the year of death and then this factor is reduced by one for each elapsed year.is the Estate liable for the income taxes on the IRA distributions at the applicable Estate rate when the distribution(s) are taken OR, can the Estate administrator distribute the IRA assets to the heirs under a valid will and have the heirs responsible for the income tax on distributions taken thereafter(at their individual tax rates) under the applicable payout scheme
The taxable distribution is included into estate's gross income
If distributions are not made to beneficiaries - the tax liability
is passed to beneficiaries (reported on schedule K-1
) and deducted from the taxable income
for the estate (form 1041
line 18 - http://www.irs.gov/pub/irs-pdf/f1041.pdf
In most situations individual's tax rates are lower and it would be more beneficial to pass tax liability to beneficiaries.
In some situation the estate is required to pass tax liability to beneficiaries.
Let me know if you need any help.