Inheriting IRAs question

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4nursebee
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Inheriting IRAs question

Post by 4nursebee »

Siblings are to inherit equal portion of four IRAs that are already paying out. What should we do at this point? Can we open one inherited IRA account for when they executor is ready? Do we need to open four inherited IRAs?

If it matters, we plan to sell take distributions out right away and close the accounts. We would do so without opening inherited IRAs if possible.

Thank you.
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brawlrats
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Re: Inheriting IRAs question

Post by brawlrats »

Each individual will need to set up his or her own inherited IRA account. You will not be able to take it out before it is in your name as the distribution needs to be recorded to your social security number for proper IRS reporting.

As estate can be named a beneficiary, but it sounds likes the IRA holder is already deceased in this case, so beneficiaries may not be able to be changed. The estate as the beneficiary also opens several other cans of worms:

https://smartasset.com/estate-planning/ ... ary-of-ira
mhalley
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Re: Inheriting IRAs question

Post by mhalley »

IRAs are INDIVIDUAL retirement arrangements, so if 4 people inherit there needs to be 4 inherited IRAs. Then the beneficiary has the choice of what to do with it. I think it would be difficult for the brokerage to determine that full distribution of the account is what each beneficiary wants and would not take on the liability of one of the beneficiaries coming back later and saying they did not want the full distribution. But, IANAL
HomeStretch
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Re: Inheriting IRAs question

Post by HomeStretch »

Is the Estate the named beneficiary of the IRA? If yes, the Executor will need to handle this.

If instead the 4 individuals are the named beneficiaries, the Executor will not be involved in the IRA transfer. The beneficiaries will need to notify the financial institution of the death, provide a death certificate and each set up an Inherited IRA at the same financial institution. Each beneficiary’s share will be transferred into their new Inherited IRA. Once the transfer is made, the beneficiary can leave the account there or transfer it to the brokerage of their choice. If the decedent was taking RMDs, the year of death RMD will need to be taken by the beneficiaries if not taken by the decedent. This can be taken in equal or unequal shares.
livesoft
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Re: Inheriting IRAs question

Post by livesoft »

HomeStretch wrote: Mon Jan 22, 2024 2:25 pm ...
Once the transfer is made, the beneficiary can leave the account there or transfer it to the brokerage of their choice. ...
... or cash it out by selling and withdrawing the money.

Some places will charge an account closure fee even for a newly opened inherited IRA by a beneficiary.
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

I'm sorry, there are FOUR Iras that are paying out.

We will inherit a portion of each of those.

Do WE need to open a single inherited IRA or four for our portion of things?

Thank you.
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HomeStretch
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Re: Inheriting IRAs question

Post by HomeStretch »

Talk to the financial institution but usually they require each beneficiary to open an Inherited IRA to receive the transfer of their share. I think you will need to do this even if you want to withdraw your share but check.

P.S. condolences on your loss.
jackrabbit14
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Re: Inheriting IRAs question

Post by jackrabbit14 »

Each person would open one IRA and roll the inherited IRAs into it.
livesoft
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Re: Inheriting IRAs question

Post by livesoft »

4nursebee wrote: Mon Jan 22, 2024 2:34 pm I'm sorry, there are FOUR Iras that are paying out.

We will inherit a portion of each of those.

Do WE need to open a single inherited IRA or four for our portion of things?

Thank you.
It will probably depend on the financial institution and if the different IRAs are all traditional or all Roth. If different financial institutions are involved, then I think you will need to open a new IRA at each financial institution. So 4 IRAs at 4 different places means 4 new inherited IRAs for you.

Otherwise, this is a question for the financial institution that currently custodians the IRAs of the deceased and not for bogleheads.org.
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

livesoft wrote: Mon Jan 22, 2024 2:44 pm
4nursebee wrote: Mon Jan 22, 2024 2:34 pm I'm sorry, there are FOUR Iras that are paying out.

We will inherit a portion of each of those.

Do WE need to open a single inherited IRA or four for our portion of things?

Thank you.
It will probably depend on the financial institution and if the different IRAs are all traditional or all Roth. If different financial institutions are involved, then I think you will need to open a new IRA at each financial institution. So 4 IRAs at 4 different places means 4 new inherited IRAs for you.

Otherwise, this is a question for the financial institution that currently custodians the IRAs of the deceased and not for bogleheads.org.
There are no Roths.

Sorry, I thought some BH might have gone though this before.
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livesoft
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Re: Inheriting IRAs question

Post by livesoft »

Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
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HomeStretch
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Re: Inheriting IRAs question

Post by HomeStretch »

livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
RyeBourbon
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Re: Inheriting IRAs question

Post by RyeBourbon »

HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Or if the beneficiaries are named on the accounts.
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
I dont know
I dont think so
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

RyeBourbon wrote: Mon Jan 22, 2024 3:58 pm
HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Or if the beneficiaries are named on the accounts.
I think they are. Does it matter?
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Does this matter?

Tough crowd around here...
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livesoft
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Re: Inheriting IRAs question

Post by livesoft »

4nursebee wrote: Mon Jan 22, 2024 4:18 pmTough crowd around here...
I agree, sometimes it is like pulling eyeteeth around here to get answers.
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RyeBourbon
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Re: Inheriting IRAs question

Post by RyeBourbon »

4nursebee wrote: Mon Jan 22, 2024 4:17 pm
RyeBourbon wrote: Mon Jan 22, 2024 3:58 pm
HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Or if the beneficiaries are named on the accounts.
I think they are. Does it matter?
If the accounts have named beneficiaries then they are not part of the estate. This would override anything stated in the will.

If the accounts have named beneficiaries, then the custodians will set up inherited IRA accounts for each beneficiary and transfer the appropriate amount into them. Then you can take your distributions and close the accounts. Easy peasy.
Dottie57
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Re: Inheriting IRAs question

Post by Dottie57 »

4nursebee wrote: Mon Jan 22, 2024 4:18 pm
HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Does this matter?

Tough crowd around here...
Yes. It all matters.


If the named beneficiary is the estate, the executor closes it and the money goes in an estate account. An estate is not an individual and can’t hold and IRA.

When my mom died, her IRA had 2 beneficiaries:me and brother. Two inherited IRAs were created at same institution , one for my brother and one for me. The inherited IRAs had mom’s name tacked on them. I suspect if mom had 4 IRAs, there would have been 4 inherited IRAs for both me and brother. Having the money easily traced from mom’s IRA to our inherited IRAs is a good thing. After everybody has the money, the inherited IRAs can be moved and probably.consolidated.
HomeStretch
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Re: Inheriting IRAs question

Post by HomeStretch »

4nursebee wrote: Mon Jan 22, 2024 4:18 pm
HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Does this matter?

Tough crowd around here...
My post wasn’t meant to be tough as that’s not my style. It was asking for pertinent information so if someone had experience with your particular custodian in an estate situation they could better respond to your question.

Best of luck.
ccieemeritus
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Re: Inheriting IRAs question

Post by ccieemeritus »

When my Mom died, her TD Ameritrade IRA listed her five grandchildren as beneficiaries. I was executor. My two kids were two of the five grandchild beneficiaries. There were no federal or state (Oregon) estate tax issues.

Most brokerages have an "estate office/phone" which specializes in estate and divorce situations. They were experienced, professional, and sympathetic.

Using beneficiaries made it (with one exception) easy. Will was irrelevant. Any of the five grandchildren could contact TD Ameritrade with proof of identity and death certificate. In theory as executor I wasn't even supposed to be involved. But I facilitated the paperwork since I had information on all five grandchildren to deal with the rest of the estate.

TD Ameritrade created five inherited IRA accounts and transferred 20% of the original account into each account. The four adult grandchildren assumed control of their accounts. Very quick. No probate.

One of the grandchildren was a minor with divorcing parents with financial issues. The will specified an adult sibling to control the inheritance until age 21 but, once again, the will was irrelevant to the IRA part of the estate. The first of the divorced parents to show up with correct paperwork would end up controlling the account on behalf of the minor until the minor turned 18 (not 21). As executor/uncle I felt responsibility to monitor this account on behalf of the minor grandchild but I had zero power to do so.
LotsaGray
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Re: Inheriting IRAs question

Post by LotsaGray »

4nursebee wrote: Mon Jan 22, 2024 2:09 pm Siblings are to inherit equal portion of four IRAs that are already paying out. What should we do at this point? Can we open one inherited IRA account for when they executor is ready? Do we need to open four inherited IRAs?

If it matters, we plan to sell take distributions out right away and close the accounts. We would do so without opening inherited IRAs if possible.

Thank you.
Each sibling will have 4 inherited IRA opened. At that point each sibling can decide what to do with there new accounts including combining them into one (probably). I am assuming that by already paying out you mean RMDs have been started so deceased is over 73. I am also assuming there is only one deceased person. If there multiple deceased, the answer would be different.
LotsaGray
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Re: Inheriting IRAs question

Post by LotsaGray »

4nursebee wrote: Mon Jan 22, 2024 4:18 pm
HomeStretch wrote: Mon Jan 22, 2024 3:07 pm
livesoft wrote: Mon Jan 22, 2024 3:01 pm Sorry, but you haven't even stated if these IRAs are all at the same custodian or not.
Or who the custodian(s) is(are).
Does this matter?

Tough crowd around here...
Well if you want correct answers you need to provide the correct necessary information.

If the accounts name the siblings as beneficiaries, then the $ never go to the estate. At a minimum each sibling will have to open an IRA with each custodian. Even if all for IRAs were with one custodian, many will insist separate new accounts for each sibling and each IRA pairing. So if 3 siblings and 4 accounts, the custodian would be opening 4 accounts for each sibling or 12 accounts total.

If the estate is named beneficiary, then the estate has 4 IRAs. Generally the estate might be able to hanlde things a little differently but there can be other issues to be dealt with.

And yes, who the custodian is can make a difference because they can choose to handle these things differently. If "we" (not me but others, who have gone through similar might be able to tell you how ABC handled in their case. But if we don't know who ABC is (are) then no one even knows if they have been through similar situation.
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4nursebee
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Re: Inheriting IRAs question

Post by 4nursebee »

Update:

Thus far we have received info packets on several IRA and annuities. We have been given choices of how we want money and have chosen for them to just send a check (or direct deposit to checking), taxes are being withheld.

It is interesting that we have not heard anything from the taxable brokerage account yet, maybe these were not TOD/POD?
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rkhusky
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Re: Inheriting IRAs question

Post by rkhusky »

4nursebee wrote: Mon Feb 12, 2024 3:59 am Update:

Thus far we have received info packets on several IRA and annuities. We have been given choices of how we want money and have chosen for them to just send a check (or direct deposit to checking), taxes are being withheld.

It is interesting that we have not heard anything from the taxable brokerage account yet, maybe these were not TOD/POD?
Hopefully the amounts won’t bump people into higher tax brackets.
exodusNH
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Re: Inheriting IRAs question

Post by exodusNH »

4nursebee wrote: Mon Feb 12, 2024 3:59 am Update:

Thus far we have received info packets on several IRA and annuities. We have been given choices of how we want money and have chosen for them to just send a check (or direct deposit to checking), taxes are being withheld.

It is interesting that we have not heard anything from the taxable brokerage account yet, maybe these were not TOD/POD?
Honestly, I would have kept it in an inherited IRA and withdrawn as needed over whatever period I was allowed.

The taxable accounts get a step up basis. There might be some backend magic they need to do before they're ready.
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