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January 4, 2008
Question on inheriting cash assets from an IRA
Question on inheriting cash assets from an IRA
A parent recently passed away. I have no other living parent.
The estate is less than the unified credit so we are in good shape.
There is no real property. Only property (stocks, funds) are in a trust and they have recently been liquidated to cash. All accounts except 1 are Brokerage accounts and the beneficiary is the trust.
The only issue I have is that there is an IRA and I am the beneficiary-not the trust. The assets (stocks, funds) in the IRA have also been sold and are in cash in the IRA.
I am a non spouse inheritor. The parent did begin taking the minimum required distributions from this IRA years ago.
We have an Estate lawyer and we have a CPA who will take care of things. However I would like a 2nd opinion on something.
Person passed away at end of 2007 and did take all required distributions from the IRA for the year.
The IRA and other accounts will be taxed as part of the 1040 for 2007 and 1041 for 2008...(for the decedents estate).
Question: Is there a way for me to avoid any further taxes (as a beneficiary) on the IRA?
**I have read about setting up an inherited IRA, also read that that perhaps I can take a lump sum distribution and have it all taxed as ordinary income, or take an annual MRD distribution over MY life expectancy or take a distribution of all money within 5 years...
GOAL:
My goal is to somehow avoid the double taxation on this IRA since taxes will be paid once by my parents estate. (The parent who died was the last surviving parent).
----Or are my only options as indicated above (see *)?
Thank you very much
Peter
Comments
Um....wrong website. Why don't you listen to or get a second opinion from a tax lawyer or cpa?
Posted by: cortnyc at January 4, 2008 4:30 PM
I think that between your estate lawyer and your CPA you will be well advised on how best to handle your situation. You don't need a second opinion from people who are not experts in complex estate planning issues.
Posted by: guest at January 4, 2008 4:47 PM
THe government always finds a way to get money that doesnt belong to them. Dont you worry, your cpa knows this and will try to minimize the damage. But oh there will be damage, dont you worry about that.
Posted by: guest at January 4, 2008 4:52 PM
Call baruch college.They have a department that answers such questions. It is called vita.
Many accountants have studied at baruch
aarp has free tax advise as well.
Posted by: Ysabelle at January 4, 2008 4:53 PM
Um, no offense Ysabelle, but I went to Baruch and participated in VITA. This is a volunteer service for low-income families, not a free resource for people seeking inheritance advice. Please do no burden this fantastic program with questions such as these.
On the other hand, you can always contact the IRS directly and get their advice and see what they think on certain tax positions you intend to take - You may not get the answer you like, but at least you can hear it from the horse's mouth.
Posted by: newsouthsloper at January 4, 2008 5:05 PM
You should consult an expert.
But if the estate is below the unified credit amount, how are you paying double tax? The money comes to you free of estate taxes but still needs to be taxed as income.
Any time you take a dollar from an IRA (except a ROTH IRA) it is taxed as income. Since your parent had already started taking distributions I THINK the law is that you must continue taking distributions at least as fast. But the money will be taxed to you as income. Since this money has never been taxed as income, it will be taxed to you for the first time. You might be able to minimize the tax liability by taking the money out in installments using the same pattern as your parents began but there's no way for it to escape all income tax.
Posted by: guest at January 6, 2008 2:56 PM
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