IRA beneficiaries

[bsrick]

facts: 3 children/(equal) beneficiaries of mother's IRA (value $84,000). Children are also equal beneficiaries of mother's revocable trust, now irrevocable due to death of mother (age of 90). Per the IRS, in year of death, the annual ira RMD (about $6,800) is to be calculated as if mother lived entire year, per IRS. Who reports this distribution: mother in final return or beneficiaries? If mother reports RMD, I assume a distribution payment is required into mothers trust from IRA. If payment is made, there appears to be no limit on an amount greater than the RMD. If a payment (say, $35,000) is made, then the mother's final 1040 would not be put into the next tax bracket, and the remainder of the IRA could be paid to the children. Due to the small size of the IRA ($84K), this would also minimize the tax impact on the children. The IRA rules per Pub 590 do not say anything about distributions greater than RMD. I realize there is an alternative course of splitting the IRA 3 ways by creating trustee to trustee IRA's in the mother's name, however because of restrictions on this type of IRA and the total value being not that large, would it be better to distribute it all now, as described, rather than split it and pay out little amounts over the remaining years (using the older beneficiary's life, per table)? We're talking 15% vs 25%.

 

[Michael Wechsler]

Wish I knew more about required minimum distributions. IMO, from what I've seen, best to speak to an accountant since other variables may effect the answer of distributions the size of what you are talking about, which are not insignificant for tax purposes.

 

[disagreeable]

At the time the IRA distribution is processed, the company rep will ask whether the beneficiaries want moms RMD portion to be processed under her SS# or theirs. You cannot manipulate the number to your tax advantage. You can simply make a choice of who the RMD amount assignment is to, for tax purposes.