Ask Terry Questions sister no beneficiaries on ira??

sister no beneficiaries on ira??

By Terry Savage on June 12, 2018 | Financial Planning / Retirement

My sister age 72 passed away in February of 2018 she has an IRA at UBS, I do not believe there are any beneficiaries listed. She died without a will-never married-no children-only 3 siblings left. Both parents deceased. Do we have to cash out the IRA (170K) and pay tax in her EIN checking account or is the money distributed to siblings and what do they do? Pay tax on full amount or take RMD’s??? Not sure how or who this account affects tax wise?? thank you

Terry Says

This demonstrates the importance of naming one or more beneficiaries on your IRA. Since there were no named beneficiaries, the money goes directly into her “probate estate” — which means the court will distribute the money when they get around to it. It will still go to her surviving siblings — BUT they lose the chance to roll it over and have it continue to grow in the future. Ordinary income taxes must be paid on the money when it is received, which could push each of them into a higher tax bracket — and assuming they are older, might even raise the cost of Medicare Part B.
Surely, there is an attorney handling the probate process (having the court distribute assets). When the estate probate is finished, you will receive a certification of who are the heirs. Then present that to the custodian of the IRA for distribution. They’ll ask for the recipients Social Security numbers to report it to the government as a taxable distribution.

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