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.................There should be a beneficiary named on the IRA account. That is who gets the IRA money. ....................
The beneficiaries are NOT part of the estate. Whoever is named on the IRA account gets the money. This is pretty important, the executor for the estate needs to follow the law.
The beneficiaries are NOT part of the estate. Whoever is named on the IRA account gets the money. This is pretty important, the executor for the estate needs to follow the law.
only exception to the beneficiary is the death of the beneficiary. If the named individual(s) are not alive the estate gets it and it goes through probate.
Turns out the brokerage will not allow movement of the IRA to the TOD account after date of death. Therefore six 'Inherited IRA' accounts must be established to follow IRS regs. Each will require immediate taxable RMD withdrawals. A lot of trouble for a small amount of funds.
So each beneficiary will pay tax on $2100 IF they take the entire amount out. But if they follow the RMD rules, each person's RMD amount per year will be based on his/her age, and the tax on that will be next to nothing.
The beneficiaries are NOT part of the estate. Whoever is named on the IRA account gets the money. This is pretty important, the executor for the estate needs to follow the law.
This
For $13K, it hardly matters but for a big IRA, the usual thing is to put the beneficiary on a distribution schedule so they don't get crushed with a 1-time tax bill. It's similar to the required minimum distribution schedule retirees have to use at age 70 1/2 but adjusted for the actuarial tables for a younger aged beneficiary.
FYI, whoever is holding the IRA should be able to help you set things up. It's not much money divided by 6 so not a biggy but if it were a large amount I believe you can put it into an inherited IRA but then must take the distributions according to RMD rules. For large amounts this could spread the tax burden (and tax bracket one might fall in) out.
Turns out the brokerage will not allow movement of the IRA to the TOD account after date of death. Therefore six 'Inherited IRA' accounts must be established to follow IRS regs. Each will require immediate taxable RMD withdrawals. A lot of trouble for a small amount of funds.
Make sure to ask the brokerage how much they are charging to set up these accounts. By the time they take out their charges on the original account and make the minimum distribution, there will be even less money left. Once they set up the new accounts they will take out the brokerage charge AGAIN for the same money in each of the new accounts, and possible charge for setting up the accounts.
When I did this for my mom's account and my dad's account, each being divided into 4 different accounts, the brokerage agreed to waive the charges for the new accounts for the first year, and any costs associated with setting up the accounts. AND for those folks who were cashing out the accounts, he kept the funds as money, that is, no trading costs were incurred for the buying or selling of stock or whatever.
Ask so that the brokerage does not end up with all the money
So, for an inherited IRA, the brokerage can't just write checks to the named beneficiaries, withhold the taxes, and let this be simple??
Also did the OP confirm that there are SIX beneficiaries actually on the IRA? (Or six heirs, and no IRA beneficiaries).
I thought those named on the IRA just get the money.....and it can be a more direct process, like life insurance. Not the same kind of vehicle but I thought the IRA process could be simple: Beneficiary gets the money, after taxes withheld. Done. Appropriate forms filed at tax time later, of course. But I thought getting the money was simpler.
The account is at Fidelity and there is no charge for the process.
The procedure is that distribution of funds is to Fidelity accounts so each of the six beneficiaries must have two accounts, one for non-retirement funds, and one for IRA.
This is as easy a process can be and still be secure and follow IRS regs.
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