Tags
5-Year Rule, Beneficiary, decedent, Distribution Rules, Early Withdrawal Penalty, Estate as Beneficiary, Executor, Inherited IRA, Inherited Traditional IRA, IRA Owner, Required Beginning Date, Required Minimum Distribution, Traditional IRA
When a traditional IRA owner dies, it’s not unusual for an executor to realize that the estate is the beneficiary of the inherited traditional IRA. Whether the traditional IRA owner forgot to complete the beneficiary form, forgot to replace a deceased beneficiary on the beneficiary form, or purposely named the estate as a beneficiary, the executor must handle the inherited traditional IRA for the estate. Unfortunately, most common executors, when the estate is the beneficiary, will assume that the only option to close the IRA account is to take a lump-sum distribution. This results in higher taxes on the distribution, and the estate beneficiaries lose years of growth opportunity for the account. Regardless, what many common executors don’t know is that there are other options in handling the inherited traditional IRA when the beneficiary is the estate.