[WSBAPT] Mandatory withholding on tax deferred account paid toEstate

[J A Cyphers]

Be sure that you receive the payment and distribute it in the same tax year
for the estate.
So pay attention to your tax year on the estate, and, of course, you can do
a fiscal year if needed and the estate has not already chosen a tax year.
Then you just have the pass through of the DNI to the heirs and no tax
consequences on the estate income tax return.
Thus, I would not have any withholding to the Estate, just complicates
trying to pass that withholding through to the heirs.
Instead, give the money to the heirs, tell them they will need to pay income
tax on it and will get a K-1 from the Estate and suggest they put 20% away
to pay the taxes and talk to their accountants for a better estimate. 
    
  
Jackie Cyphers
Jeannette A. Cyphers, Attorney at Law
P. O. Box 908   
Edmonds, WA 98020-0908
425-776-5887
fax 425-640-0814
jacyphers at gmail.com
 
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-------Original Message-------
 
From: Eric Nelsen
Date: 2/26/2015 4:21:08 PM
To: WSBA Probate & Trust listserve (wsbapt at lists.wsbarppt.com)
Subject: [WSBAPT] Mandatory withholding on tax deferred account paid
toEstate
 
Decedent has a tax-deferred account of about $35,000 that has no named
beneficiary and will be paid to Estate. I honestly can't remember the last
time I had this problem, if I ever have. The Estate will distribute pretty
quickly to the five heirs ($7,000 each), who of course will have to take the
money as income and pay income taxes. 
 
Should we opt to allow the 20% withholding from the payment to the Estate,
or tell the custodian to send the Estate the entire amount, no withholding,
and let the beneficiaries deal with it? Are there significant pros and cons
to both options?
 
Sincerely,
 
Eric
 
Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040
 
 
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