Thank you for revealing the options for reporting by fiscal year.
You had next stated: "Unless the funds are needed by the estate to pay an estate income tax liability (which would be unusual if the income is passed through to estate beneficiaries on Schedules K-1), make sure to have no taxes withheld from an IRA distribution paid to the estate. Credit for such tax withholding cannot be passed through to estate beneficiaries."
I'm still unclear regarding potential pitfalls associated with taking a distribution from the Estate IRA-BDA as the means of liquidating pre-tax funds, (allowing me as PR to pay estate and final probate expenses).
Fidelity's process allows me to make the Estate IRA withdrawal via a check mailed to a local bank routing/account associated with the Estate Checking account. Amidst this transfer option, Fidelity asks me if I want taxes withheld and if so, at what rate.
I had been inclined to allow taxes to be withheld for the simple reason that in doing so, the taxes would be paid in sync with the income, effectively mitigating penalty as well as the need for a separate Estimated Tax mailing. These taxes would be paid by the Estate, seemingly rightfully. I'm not understanding why there would be a concern about any credit needing to be passed through to estate beneficiaries. To me, the tax induced by the obligatory need to pay estate expenses is a collateral expense of the probate which effectively reduces the inheritance value commensurate to share.
At this stage of the questioning, in my mind, the paraphrasing of my question is this:
Should I pay the taxes for the Estate withdrawal now via Fidelity? If I don't pay taxes now, I will have to set aside the equivelent funds prior to distribution to the beneficiaries, in anticipation of later tax payment.
Odds are high that I may have misinterpreted something. Thank you in advance for your patience and perseverance in clearing all of this up. Extremely helpful.
