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

Thu Oct 27 13:42:04 PDT 2022

I have been in contact with the CPA, who is waiting for the decision.  There
are 18 people sharing in this and the CPA is wondering how many K-1's must
be prepared.

W. Jeff Davis

BELL & DAVIS PLLC

Attorneys at Law
P.O. Box 510

720 E. Washington Street, Suite 105
Sequim WA 98382
Phone: (360) 683.1129 
Fax: (360) 683.1258 
email:  <mailto:jeff at bellanddavispllc.com> jeff at bellanddavispllc.com
 <http://www.bellanddavispllc.com/> www.bellanddavispllc.com

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>
On Behalf Of Jeff at bellanddavispllc.com
Sent: Thursday, October 27, 2022 1:39 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)

We confirmed the estate is the beneficiary.  Its around a million dollars.
The percentages are between 3% - 7% with one getting 20%.  One thing, also,
is most of these beneficiaries, themselves, are elderly.

Jeff

W. Jeff Davis

BELL & DAVIS PLLC

Attorneys at Law
P.O. Box 510

720 E. Washington Street, Suite 105
Sequim WA 98382
Phone: (360) 683.1129 
Fax: (360) 683.1258 
email:  <mailto:jeff at bellanddavispllc.com> jeff at bellanddavispllc.com
 <http://www.bellanddavispllc.com/> www.bellanddavispllc.com

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From: wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com>
<wsbapt-bounces at lists.wsbarppt.com
<mailto: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
<mailto: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

Get Outlook for iOS <https://aka.ms/o0ukef> 

  _____  

From: wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com>
<wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com> > on behalf of
Jeff at bellanddavispllc.com <mailto:Jeff at bellanddavispllc.com>
<Jeff at bellanddavispllc.com <mailto:Jeff at bellanddavispllc.com> >
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
P.O. Box 510

720 E. Washington Street, Suite 105
Sequim WA 98382
Phone: (360) 683.1129 
Fax: (360) 683.1258 
email:  <mailto:jeff at bellanddavispllc.com> jeff at bellanddavispllc.com

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