Comments on: Inheriting or Bequeathing an IRA

By: JOE

JOE — Tue, 03 Jan 2012 23:43:54 +0000

Ok, first you look at publication 590 and see that at age 12, she has a divisor of 70.8. You then take the IRA balance at 2011 year end, say, it's $100,000. 100000/70.8 = $1412.43. This is her RMD for 2012. She is not 'too young' to file a return, I think my child's first return was when she was 2. Keep in mind, there is a kiddie tax exemption, so the child gets $950 with no tax at all, and the next $950 at 10%. In my example, about $46. Yes, the parent can just add to their return, but that would be at their rate, not a good idea. Last, the withdrawal can be "in-kind" which means it can be made in the form of the stock or fund within the IRA. If it's a stock, it's OK to go over a bit, e.g. round up to the nearest whole share, and pay the small tax due. Remember the RMD is the minimum required, more is ok. Next year, you do not refer to the chart, her divisor goes down by one each year. How you manage it once it's out of the IRA is up to you, but one way is to set it aside in her name, and when she's working, use it to help her fund a Roth IRA, but that's another subject.

By: Duna

Duna — Tue, 03 Jan 2012 21:27:19 +0000

Question: If my granddaughter is 12 in 2011…and she is the receipient of my IRA …how does she withdraw the required minimum distribution and how does she pay the taxes on the amount she withdraws. Can she be allowed to keep it in the original investment…until she needs it for college? She is too young to file a tax return….how does this work?

By: JOE

JOE — Tue, 25 Oct 2011 01:17:57 +0000

The effort is minimal, paperwork to the broker holding the IRA. Even $20K in the account can grow over time if the beneficiary only withdraws the required minimum each year. A shame to have it withdrawn and taxable all this year.

By: CJ Briggs

CJ Briggs — Tue, 25 Oct 2011 01:05:16 +0000

I am facing this situation right now. Is it worth all the trouble (to do something other than a full payout) if the IRA is relatively small? I am talking about $77k split between 4 beneficiaries (all children of the deceased).

By: WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ | Tax Identification Number

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ | Tax Identification Number — Sun, 13 Feb 2011 04:53:56 +0000

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By: JOE

JOE — Tue, 04 Jan 2011 17:12:47 +0000

No problem, good luck Karen. The only account I’ve ever seen that needs a spouse sign off is a pension, surprised that this has such a restriction.

By: Karen

Karen — Tue, 04 Jan 2011 13:09:17 +0000

They are two investment accounts my Father started years ago. Their TOD forms have a section for the spouse to sign-off my beneficiary desgination if it’s anyone other than him. The forms read that this spousal sign-off is mandatory or, regardless of my designation, at my death the spouse inherits 50% anyway; and the remaining 50% is set-aside for that process.

From reading the firms’ TOD forms, I assumed these were IRAs or 401k(s). My Father has since said they are not “retirement” accounts, but they are personal investment accounts in stock market funds. There’s a bit of a process to name a new TOD and I want to be sure it’s done right.

Thanks for your reply!

By: JOE

JOE — Mon, 03 Jan 2011 14:19:58 +0000

Is this an IRA you’re asking about? I don’t believe you need anyone’s permission to change your own beneficiary on these, is your broker saying otherwise?

By: Karen

Karen — Sun, 02 Jan 2011 22:06:14 +0000

Thank you for your easy-to-comprehend advice! I’m new to the IRA bequeathing issue. I was shocked to learn how impossible it is to leave these accounts to my blood offspring. May I ask?

My living Father transferred to me, at this very late juncture in life, two investment accounts that he’d opened when I was a child. I’m now 60. I want to protect those accounts from inheritance by my husband or his family; and to preserve them for my own natural born grandsons. Clearly my husband has no vested interest in the accounts. I’ve learned that cannot name a Transfer On Death beneficiary without my husband’s sign-off and that just is not practical.

What can I do to most effectively and efficiently bequeath these accounts to my own blood offspring?

By: Top 135+ Personal Finance Posts for 2009 (That can be used 2010 and beyond)

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[...] Inheriting or Bequeathing an IRA explaining the rules to properly handle the details of the IRA before and after one passes [...]