This is regarding my sister-in-law
's estate. I am executrix. NJ estate taxes
have been paid. She has 4 CD's, valued at $129,000. Two of her brothers are listed as beneficiaries on them, and we've been told they'll need to pay income tax
on the amounts they receive. They then plan on signing the checks over to the estate, so that I can pay her outstanding medical bills. Her will designates three beneficiaries. All three of her brothers.
My question is regarding the tax
burden on any of the remaining funds which I will equally disburse to the three brothers. The third brother's tax accountant told him that those funds will NOT be taxable. That I understand. But what about the funds redistributed to the original two brothers? They plan on opting to have 20% federal tax
taken from each of their amounts, so will receive 1099's at some point. I my mind, they are basically paying tax on a value that they are not going to receive.
How does something like this get handled by IRS?