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Lev , Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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Situation: Ms. X dies at 88, leaving an 3 IRAs with 3 children

Resolved Question:

Situation: Ms. X dies at 88, leaving an 3 IRA's with 3 children as beneficiaries on each IRA.
She had income in 2012 of aproximatly 20K and medical expenses of aproximatly 40K. All her bills have been paid. There is 30 K in the estate. The IRA's are aprox 100K each.

The Question: Can some of the IRA money be cashed into her estate and thus offset by deductions. If so, assuming that all beneficiaries are at 20% marginal tax rate what would be the optimal amount to transfer to the estate?
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.
Hi and welcome to Just Answer!
There should be two tax returns filed for Ms. X - her final tax return on form 1040 - reporting all income and deductions up to the date she died, and estate income tax return - form 1041 - reporting income and deduction of the estate.
If additional - if the total value of the estate is above $5M - there will be an estate tax return of the estate - form 706.

Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized.

Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred.

However - and that is very important - medical expenses may not be deducted from estate income (Form 1041) and may not be passed to beneficiaries.


Let me know if you need any help.
Be sure to ask for clarification if needed.

Customer: replied 3 years ago.

This does not answer the critical questionn. Can money from the IRA be moved into the estate?

Expert:  Lev replied 3 years ago.

That is possible.

The estate may be the beneficiary of IRA accounts.

If the beneficiary is not named on the IRA account or a named beneficiary disclaims his/her share - the estate would be automatically treated as a beneficiary.

In this case distribution will be made and reported to the estate.


Let me know if you need any help.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience: Taxes, Immigration, Labor Relations
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