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

[Joshua McKarcher]

A million dollar IRA with no beneficiaries? Call Natalie Choate! I'm only mildly joking. https://ataxplan.com/ (Or Robert Keebler maybe? https://keeblerandassociates.com/about/ -- unless anyone on the list knows otherwise?)

If Phil et al are saying that the PR can actually direct the creation of individual inherited IRAs in proportion to the percentages in the will, well, that sounds like an actuarial and "tax fairness" minor nightmare, on which I would want highly experienced "IRA tax attorney" or the equivalent (not just CPA who generates K-1s) advice.

Wow. That is quite a hand you've been dealt. But, one potential simplifying solution: if all the elderly beneficiaries understand the cost and complexity of figuring out the inherited IRA options, and are fine with the "cash out, distribute, and send K-1s" strategy, then get them to memorialize their agreement and then DO IT.

But otherwise, I would be pulling in someone who solves THAT kind of problem with far more frequency than people like I do.

Truly, this time, GOOD LUCK!!! Best, Josh

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 2:42 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)

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: jeff at bellanddavispllc.com<mailto:jeff at bellanddavispllc.com>
www.bellanddavispllc.com<http://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 Jeff at bellanddavispllc.com<mailto:Jeff at bellanddavispllc.com>
Sent: Thursday, October 27, 2022 1:39 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)

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: jeff at bellanddavispllc.com<mailto:jeff at bellanddavispllc.com>
www.bellanddavispllc.com<http://www.bellanddavispllc.com/>

The information contained in this e-mail message may be privileged, confidential, and protected from disclosure. If you are not the intended recipient, any dissemination, distribution, or copying is strictly prohibited. If you think that you have received this e-mail message in error, please e-mail the sender at info at bellanddavispllc.com<mailto:info at bellanddavispllc.com>  or call 360.683.1129.


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

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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 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: jeff at bellanddavispllc.com<mailto:jeff at bellanddavispllc.com>
www.bellanddavispllc.com<https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.bellanddavispllc.com%2F&data=05%7C01%7Cpjones%40duffykekel.com%7C7df2296d0dad4a1e61f108dab853f898%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C638024968047562014%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=%2BvsraNTb8kKuPQrXJGb4KSEPTyUOsm789gozvTGYKyE%3D&reserved=0>

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