Full question:
My brother died and in his will listed his heirs as two sisters and a brother. On a 401k and two other retirement accounts (408 and Simple IRA) he named just one sister (the executrix) as the benefactor. She wants the money to be split evenly with the other siblings as we think it was just an oversight and our brother would have wanted an equal distribution. But because it is just in her name, does she have to cash out the accounts and get hit with federal taxes and then gift to the other siblings or is there a better way the shares can be divided into retirement accounts in each siblings names and not withdrawl anything?
- Category: Wills and Estates
- Subcategory: Probate
- Date:
- State: Pennsylvania
Answer:
If the current account owner adds new owners and the new owners don't contribute any money into the account, then the current owner may be deemed to have made a gift of a portion of the account to the new owners for gift tax purposes. If the gift amount exceeds the annual exclusion from gift taxes, then the gift must be reported to the IRS on a gift tax return (Form 709).
You and your siblings can't have a joint IRA account. The "I" in IRA stands for "Individual," and the feds really mean it. We suggest contacting the financial institution.to inquire whether the account can be transferred into a joint account.
It may also be possible to have an heir agree to a disclaimer of interest if the heirs choose to divide title differently from the ownership shares specified in the will. Typically, property must be disclaimed within 9 months from the date of transfer to the disclaiming party. The IRS has frequently approved disclaimers to transfer assets in qualified retirement plans. The usual situation involves a disclaimer by a spouse so that assets pass to the children. In each situation, the person who made the disclaimer was not liable for any income taxes attributable to the retirement plan assets but, rather, the new beneficiaries had to report the income in respect of a decedent.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
