IncomeTaxFilter: Inherited IRAs, taxes, and my lazy, lazy habits.

April 4, 2008 10:06 AM

I inherited a proportional share (a third or a half, usually) of several small IRA accounts last March. I have yet to actually claim these inheritances or do rollovers for them, so technically they're still under the name of the decedent. Do I have any tax obligations for these for 2007? Does the decedent (meaning do I have to do anything for the decedent's 2007 return)?
posted by liketitanic to work & money (10 comments total)

I am not an accountant or anything, but I was in a similar situation. You may need to take minimum required distributions, depending on how old the decedent was at death and your relationship to them (this article has a good summary). Other than that, I don't believe you or the decedent have any tax obligations--these are IRAs, so if you are rolling them over they are still sheltered and don't count as income.
posted by phoenixy at 10:37 AM on April 4, 2008

Get a lawyer. These questions aren't for laypeople.
posted by Ironmouth at 2:17 PM on April 4, 2008

In that case, anyone have recommendations for an SF Bay area attorney?
posted by liketitanic at 3:19 PM on April 4, 2008

You should read through the applicable sections of this IRS publication if it doesn't make your head hurt too badly. I just helped my mother with the ordeal of inheriting an IRA, and it is a lot more complex than you would think. Please consult a professional. IAAL but IANYL.
posted by gatorae at 4:03 PM on April 4, 2008

The custodian of the accounts can usually answer these questions.

The only tax-related issue is whether a minimum required distribution was made in 2007. If it was not, that is the responsibility of his executor, not you, but of course the money will come from the accounts.

The MRD would have been required only if he was over age 70.

You, on the other hand, will have to take distributions starting in 2008. The original participant's age is not relevant. The amounts will have to be determined based on the life expectancy of the oldest of the beneficiaries. If there is a significant difference, though, the accounts can be split.

Usually the custodian will automatically make the distributions to you.

And the account remains in the name of the decedent. There is no option for a rollover. The custodian may be able to add your name, though - e.g. "Merrill Lynch, custodian for John Smith (Like Titanic, beneficiary)".

It is more likely that a randomly selected accountant will know more about this issue than a randomly selected attorney. Of course, neither professional should be selected randomly.
posted by megatherium at 4:03 PM on April 4, 2008

I know I need a lawyer or an accountant. Recommendations would be great if anyone has any. And I know I started on this too late in tax season. For many reasons, it was just the last thing on my list and my resources for doing this myself are pretty limited. So: any recommendations, then, for professional assistance in the Bay Area, other than the suggestion that I find a professional, whose assistance is clearly called for?
posted by liketitanic at 4:38 PM on April 4, 2008

Search for a lawyer, enter "tax lawyer" and the geographic information. Search for a California accountant, choose "estates/trusts".

Call one. He or she may well be willing to discuss the issue by phone, if you have your information handy. The cost of answering your questions may not be that high.
posted by megatherium at 6:06 AM on April 5, 2008

Thanks, that narrows the field a little and I appreciate the Cal CPA referral site. (Yes, I feel a little silly, but grieving does make one a little bewildered.)
posted by liketitanic at 1:28 PM on April 5, 2008

All of the answers to your questions are in IRS Form 590. However, if you're not the kind of person who enjoys puzzling over the arcane sentences in this type of document, definitely find a financial adviser to help you, either an accountant or attorney.
posted by ikkyu2 at 4:39 PM on April 5, 2008

For MeFites of the future, I found some excellent SF Bay accountants, so message me if I can help.
posted by liketitanic at 12:27 PM on April 8, 2008