no designated beneficiary — who is taxed?
Aunt Mary dies at age 90 in September 2007. Her IRA has no designated beneficiary. The entire IRA is paid out in one lump sum to the estate in December 2007.
(1) Is this a probate asset? (She was entitled to it while she was alive!) If so it would seem to be taxable to Aunt Mary on her 2007 Form 1040.
(2) On the other hand, does it matter if the payout occurs in January 2008? Is the payout then taxable to the estate?
Permalink Submitted by Alan Spross on Tue, 2008-03-25 21:59
1) It’s subject to probate since it is correctly paid to the estate. The estate typically would then report the income and pass the taxable income through to the estate beneficiaries on a K1 and therefore taxable to them. It does not go on Mary’s final return.
2) No, this does not matter, although Mary’s final return should include a 5329 requesting relief from the excess acculation tax if she did not take her 2007 RMD prior to passing. The relief is more or less automatic. See p 6 of the 5329 Inst. (Reasonable Cause ie. “RC” = Death).
Permalink Submitted by Alan Spross on Tue, 2008-03-25 22:15
I just saw your other post. I assume then there were two IRA accounts represented by your two posts.
Permalink Submitted by Fred Dashiell on Tue, 2008-03-25 23:58
Yes — this is not just a hypothetical case. She had several IRA’s.
Thanks for your comments.
… Fred