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Hi and welcome to Just Answer!Appreciate for specifically requesting me.Please let me some time to reply.
Having beneficiaries on financial accounts will allow to avoid lengthy probate procedure and have access to these accounts immediately after the death.Other options includes POD - payable-on-death (or TOD - transfer-on-death) provision on the account - which woudl have a similar effect. That will not affect the tax liability.Inheritance is not taxable on the federal level. Income received AFTER the person dies is classified as IRD - income in respect of the decedent - and is taxed for beneficiaries or for the estate the same way as it woudl be taxed to the decedent if he/she were alive.If the house is on your mother's name - it will be passed to her estate - but the Will will be probated - and that will take approximately 6 months plus some overhead. To avoid probate - your mother might create a living trust and transfer the property to the trust. While the living trust generally ignored for income tax purposes - after the settler's death - the trust becomes irrevocable - means - it will be a separate legal and taxing entity. In this case probate would not needed. Your mother as a settler may be also a trustee and you could be named a succeeded trustee.That is something you might want to consider.
Are you saying by putting the house in a trust will make it taxable to the heirs? If a trust is set up does she loose ownership in the sense that her property taxes are frozen do to age and income.
However the distribution from IRA account is classified as income in respect of the decedent (IRD) - and that is taxable income upon distribution - because the distribution will take place AFTER the death.
On form 1041 the taxable portion is reported on line 8 as Other income. If passed to beneficiaries - the taxable amount is deducted on line 18 and reported to beneficiaries on K1 forms - line 14.www.irs.gov/pub/irs-pdf/f1041.pdfwww.irs.gov/pub/irs-pdf/i1041.pdfwww.irs.gov/pub/irs-pdf/f1041sk1.pdf
To accomplish that - you may rollover funds into so-called "inherited IRA" and spread distribution over several years - thus effectively will reduce and defer your tax liability.