Money in, money out

[pinkytoe]

Apparently, the bulk of recently deceased MIL's monies are in IRAs so as beneficiaries we will receive "inherited IRAs". RMDs must be paid every year and and any money withdrawn other than that will be taxed as ordinary income. Much to learn yet but makes me think twice about leaving IRA funds to beneficiaries. Blecchhh!!

[sweetana3]

I am only confused about the "any money withdrawn over than that". RMDs must be paid each year (and the laws are constantly changing) and are generally fully taxed as ordinary income. Roth IRAs are different. One of the most complicated things I have ever dealt with in our case.

The Trust Dept. of our credit union was pretty great except for telling us what they thought we should do once we were fully informed.

[jp1]

Yes, you will have to pay taxes on the RMD as well. The whole point of RMDs is for Uncle Sam to get taxes paid on that income even after the person who earned it has died.

[ToomuchStuff]

RMD?

Shouldn't it be RMW? Not a deposit.

[iris lilies]

RMD?

Shouldn't it be RMW? Not a deposit.

the D is Distribution

[Tybee]

All the money has to be out of the IRA in ten years, as well.

[iris lilies]

All the money has to be out of the IRA in ten years, as well.
I didn’t know that fact. I was hoping you’d jump in here because you’re conversant with these issues.

When both sets of our parents died, DH handled details and I have forgotten the issues involved.

The only thing I would say to watch out for is if you all of a sudden have a ton of inherited money that counts as income, that will affect how much they charge you for Medicare coverage as well.

[iris lilies]

I don’t know the “best “way to leave money to those coming after us but I don’t worry too much about my heirs having to pay tax on what they get from us. It’s still additional money for them that they didn’t have prior to my death.

[pinkytoe]

The weird thing is DHs brother is the executor and did not give us any amounts only that we have to set up accounts at the same institution so monies can be transferred. Unfortunately, they do not like each other so dialogue between them is always strained. I guess IRAs don't need to be probated if heirs are named on the accounts.

[iris lilies]

The weird thing is DHs brother is the executor and did not give us any amounts only that we have to set up accounts at the same institution so monies can be transferred. Unfortunately, they do not like each other so dialogue between them is always strained. I guess IRAs don't need to be probated if heirs are named on the accounts.

yes, anything in any brokerage account need not go through probate if beneficiaries are named on that account.

we ended up with an Edward Jones account, mainly to accept money from my mom’s estate. we did the same thing with DH‘s father‘s distributions, which he held in one Edward Jones office in the tiny farming community, and we opened up an account in the other Edward Jones office across the street in that same tiny town.

When I say we did the same thing, I’m saying that not really knowing what was actually “required.” You just have to be aware that when you take money out of Ed Jones or any other brokerage house, they charge penalties. The penalties may be stiff.

in fact, our Edward Jones rep representative just called us last week because he’s moving to a non-Edward Jones company and he wants us to follow him. I don’t know what DH decided. Edward Jones is going to charge us for leaving, but the new company will pay those fees, so… Who knows. I was actually going to move the Ed Jones account to here in Hermann.

the only reason we kept an Edward Jones account for so long is because it was important to us to support the businesses in my old neighborhood’s business district.

[ToomuchStuff]

I don't know about the 10 year thing, as I thought inherited IRA's could be rolled into the beneficiaries IRA. (heard a tiny bit of talk about stuff like that, but didn't pry, when inlaw's family died and the money was divided up).

Good to know on Distribution, as I was reading it more as Deposit, instead of Withdrawal) what my family calls it.

[Tybee]

Here's a link to a schwab article about the 10 year thing, which applies to non-spouses, so you have to scroll down past the spousal stuff to get to it:
https://www.schwab.com/learn/story/inherited-ira-rules-secure-act-20-changes#:~:text=The%2010-year%20rule%20requires%20that%20all%20assets%20in, earlier%2C%20the%2010-year%20rule%20was%20a%20five-year%20rule.%29

[jp1]

I did not know about the ten year thing either. Dad died in november of 2014. I guess I will soon be facing that. Not that it's a big deal since there's less than $1,000 left in his IRA at this point, but thanks for the heads' up.

[Simplemind]

I believe with my dad's it was cashed out and taxes were paid before distribution to the three of us.

[Tybee]

I believe with my dad's it was cashed out and taxes were paid before distribution to the three of us.

With my mom's small IRA, one sibling kept it as an IRA, and two of us paid the taxes ourselves on our part of the distribution.