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Financial Planning / Tax Strategies
|Subject: Re: Inherited IRA tax||Date: 3/15/2012 3:50 PM|
|Author: JAFO31||Number: 115505 of 121182|
RBMunkin: "A friend and his brother inherited an IRA from their father."
Inherited, (1) as the IRA beneficiary designation said "payable to the estate of _____________ [the decesaed father] or (2) as in they were named beneficiaries on the IRA account or (3) is there some kind of trust?
"It is stipulated in his will that they must invest the inherited IRA funds and the income would go to his (relatively new) second wife."
If scenario (2) above, I doubt that the language of the will is binding upon the friend and his brother. If scenario (1) above, then I believe that all the money needs to be out of the IRA within five years after the year of death.
And there are two and half tax issues.
Estate tax is generally paid by the estate - federal and some states.
Some state have inheritance taxes, where the recipient pays based on what they receive.
Income tax on IRA distributions (unless it was a Roth IRA).
Your friend needs to be careful not to confuse the various taxes when discussing them or trying to understand something written about them.
Good luck, JAFO
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