My wife has recently lost her father to cancer. He has an IRA worth over 1.5 million. The banker, (also his financial planner and executor of the will) wants to distribute this IRA money to the 7 heirs over the next 5 years. He claims we would pay less taxes this way as apposed to selling it off and distributing the money all at one time along with the rest of his estate. I believe he has an interest in this money staying with his bank as long as possible. Sad thing is he didn't do any estate planning. Question. If this IRA is all before tax money, does his estate have to pay income tax on it now that he passed away or does it acquire a new basis on the date of death like the rest of his investments? If it does acquire a new basis, why distribute the IRA money in lump sums over the next 5 years? PS. Due your estate planning. The government is getting 1 million of his 3 million estate.
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