Income in Respect of Decedent (IRD)

Submitted by ShipsnGiggles on Wed, 2017-09-13 14:37

This is a rater interesting (complex) fact pattern with a number of moving parts. Here is a summary along with my questions. All assistance/guidance is greatly appreciated.

FACTS
T-IRA owner dies at 86 – leaving his IRA to his surviving spouse
Surviving takes the IRA in her name
Surviving spouse subsequently dies at 76 – her 4 children were named as equal (25%) primary beneficiaries.
Each of the 4 kids have been “stretching” based on their individual life expectancy
One of the child beneficiaries “Amy” died earlier this year – Her will indicates that her trust will dictate the disbursement of her estate, & the trust calls for all of her assets, including IRA’s to be distributed to her 3 remaining siblings. “Amy” has already taken her 2017 RMD

Questions
Can her inherited IRA (e.g. IRA from mom) be “split” into 3 inherited IRAs; success beneficiaries (e.g. for each of her siblings)?
Assuming so, does each sibling as a successor beneficiary continue the stretch using Amy’s” remaining life expectancy?
In addition, one of the siblings is considering disclaiming. Is a disclaimer permitted assuming the disclaimer is finalized with 9 months of Amy’s death? Who would inherit assuming the disclaimer is qualified?

FACTS (cont’d)
Upon surviving spouse (mom) passing her federal estate taxes were significant.
Each of the 4 siblings was able to take a tax deduction (IRD) on subsequent RMDs

Questions (cont’d)
How is the unused portion of “Amy’s” IRD determined?
For example, can “Amy’s” deduction be applied (passed on) to her beneficiaries? Assuming so, is the deduction applied proportionally to each of her beneficiaries?

Thank you!!!



Submitted by Alan - IRA critic on Wed, 2017-09-13 16:11

  • Assuming Amy named her estate as her successor beneficiary or the IRA agreement applies her estate as her default successor beneficiary, the trustee of the trust can assign her inherited IRA to the trust beneficiaries. Cooperation of the IRA custodian could become an issue in some cases. The RMD schedule for these trust beneficiaries continue using Amy’s remaining single life expectancy.
  • A beneficiary of Amy’s trust can file a qualified disclaimer. The provisions of the trust determine where this share would go if the disclaimant pre deceased Amy. If the disclaimed share goes to the other 2 trust beneficiaries, their share of the IRA would be increased. Again, there could be challenges with the IRA Custodian understanding this situation.
  • The IRD deduction that Amy was using would be ratably passed on to the trust beneficiaries,  but due to dilution it could end up being too small or certain beneficiaries may not have enough deductions to itemize. Each of the 4 siblings should have received the applicable numbers from the estate attorney who filed Mom’s 706.


Submitted by david zolt on Wed, 2020-09-23 16:44

My question is regarding the unused IRD deduction passed on to the next generation of IRA beneficiaries.  In my situation, the decedent also had IRD on her estate tax return that will generate another estate tax deduction on the beneficiaries’ income tax returns going forward.  How do I use these 2 balances going forward?  What percentage do I apply to each year’s distribution to calculate the estate tax deduction for Schedule A of the beneficiary’s income tax returns?  The decedent used a percentage from her ex-husband’s estate given to her by the estate tax return preparer.  However, she will have a different percentage generated from her estate tax return.  Do I combine the balances and use the new percentage?  Or do I keep separate balances and apply the respective percentage to each balance.  If the answer is the latter, how do I allocate the IRA distributions going forward to apply each percentage?



Submitted by david zolt on Mon, 2020-09-28 15:51

Is there any guidance in this area?  If not, how would you approach it?



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