Have Tax Questions? Ask a Tax Expert for Answers ASAP
Sorry, please don't shoot the messengr here, but (from the PA dept of revenue here:https://revenue-pa.custhelp.com/app/answers/detail/a_id/988/related/1/session/L2F2LzEvdGltZS8xMzgwODk2MjM1L3NpZC85VVFYZVlCbA%3D%3D ): If the decedent was over 59 1/2 years old at the time of death, the IRA will be subject to inheritance tax. The rate of tax is determined by the relationship of the beneficiary to the decedent.
As you may know the inheritance tax rate is determined by the relationship to the person who has passed (decedent) Let me look that up for you But, befofre I do that (IRA's that have pre-tax dollars in them - deduction was made for the contribution or maybe it was created through a rollover of pre-tax dollars from a 401(k) or other retirement plan - carry an income tax ... either to the owner, while alive OR to the beneficiary if the decedent dies with money still inside the IRA) ... SO not putting yourself on the IRA and having the tax paid on her last tax return and then pass to you through the estate MAY actually be the least costly way to do it .... WHY? Whatever estate tax is due will be due either way, and the beneficiaries MAY be in a higher tax bracket than the decedent.
Income tax bracket, that is ... the INCOME tax that's paid on an INHERITED IRA is called Income in Respect of a Decedent (IRD)
Finally, here are the tax rates (INHERITANCE tax rates) for PA:
The rates for Pennsylvania inheritance tax are as follows:
So, the INHERITANCE tax rate for the tow children will be 4.5% , but again, there could also be income tax on the IRA (called IRD) to any beneficiaries
One last thing: If you ARE put on the IRA as beneficiaries, you are not forced to pay the tax on any pre-tax dollars all at once, you have some options
Here's an excellent article from Fidelity on the taxation of non-spouse beneficiaries of IRAs: https://www.fidelity.com/viewpoints/non-spouse-IRA
I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)
Please let me know if you have any questions at all ...