1099-R issued to an Estate
My father had an Prudential annuity with his second wife (not our mother) as the sole beneficiary of the annuity, who predeceased him. Therefore it must go to his estate before it can go to the beneficiaries named in his will (my sister and me). I went through the process of setting up a new tax entity "The Estate of **** ****", a new bank account and have started the probate process with the applicable county court. I am also the personal representative of the estate and executor of his will. Prudential says that the new estate entity will be the beneficiary of the annuity and they must transfer it in a lump sum to tha new estate bank account. They will also provide a 1099-R to the estate for that lump sum transaction. It should show approximately $266K gross distribution (box 1) and $48K taxable amount (box 2a). Prudential said that I could choose to have state and federal taxes withheld prior to the distribution, which would also show on the 1099-R.
Can I have the estate pay the state and federal taxes (via withholding or paying it via the estate tax return) and therefore, have the distribution of the estate be completely tax free to my sister and me since the taxes have been paid on the? Are there alternative ways?
