[WSBAPT] IRA Payable to Estate - PR"s authority to distribute in kind or cash and distribute cash (with K-1)

[Roger Hawkes]

Agreed; caution is warranted; and if NIP have been granted the PR gets to decide.

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Philip N. Jones
Sent: Thursday, October 27, 2022 1:19 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] IRA Payable to Estate - PR"s authority to distribute in kind or cash and distribute cash (with K-1)

These are excellent questions.  I believe that there is no right or wrong answer. It might depend in part on the size of the IRA. If the IRA is relatively small, it might not justify creating inherited IRA accounts for each of the various beneficiaries, and liquidating the IRA would be the best option. On the other hand, if it is a large IRA, the liquidation of the IRA would deny the ability of each beneficiary to stretch out his or her payments into the future. If some of the beneficiaries want cash, and others want an inherited IRA, it would probably be best to give them each an inherited IRA, and let each of them decide when to liquidate their particular account. I say that because it may be difficult to work out the tax consequences fairly if some of them receive inherited IRA accounts and the rest receive cash from the estate after the estate has liquidated the rest of the main IRA account. Keep in mind that the distribution of an IRA intact does not carry out income, because most IRAs lack basis, and the code provides that an asset that lacks basis does not carry out income. As a result, you have to proceed very carefully when dealing with a situation like this. This is because an IRA constitutes IRD, or income in respect of a decedent. I'm assuming that this is a traditional IRA and not a Roth IRA. This is a complicated subject and will require some complex analysis. Proceed with caution.
Phil Jones

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Sent: Thursday, October 27, 2022 12:43:53 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] IRA Payable to Estate - PR"s authority to distribute in kind or cash and distribute cash (with K-1)


Listmates:



IRA has no POD beneficiaries, so it becomes an estate asset.  Many residuary beneficiaries who take in varying percentages.  Administratively, the Personal Representative prefers to liquidate the IRA and distribute the cash (per the %) and each beneficiary would receive a K-1.  Does the PR have the right to liquidate the IRA, rather than offering the beneficiaries the option of taking their % in kind?  Does the PR have to consider the income tax consequences of each beneficiary?



Your thoughts and/or experiences.



Jeff Davis



W. Jeff Davis

BELL & DAVIS PLLC

Attorneys at Law
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