Do forced distributions of inherited mutual fund shares reduce the value of the associated estate?

[gw-hicks]

Trying to close my Mother's estate. I have been told inherited shares must be fully distributed within 10 years. These added taxes seem to reduce the estate's value.

[M-MTax]

Who or what is forcing the distribution of the shares? Only the will or testamentary document could specify a time limit. There's nothing in the tax law that mandates shares or other property must be distributed within 10 years and the value of the estate is fixed at the time of death at least for tax purposes such as estate tax.

[fanfare]

this is going to depend on the account holding the mutual fund shares.

the 10-year rule now applies to Inherited IRAs and Inherited Roth IRAs.

YES, this new law severely reduces the future value of Inherited IRAs.

If it is a regular investment account (not tax deferred) there is no 10-year rule.

[fanfare]

P.S.

You don't have to liquidate now to close the Estate !!

[M-MTax]

If this was an IRA and the estate was the beneficiary the 10-year rule doesn't apply.

[gw-hicks]

I was told by T. Rowe Price (TRP) that, as an inheritor of Mutual Fund shares, there are tax ramifications.

TRP said that I could face a severe IRS penalty after 10 years if I did not pay the taxes associated with these inherited shares. They did not elaborate.

I believe TRP was trying to be helpful, but they said I should contact my tax professional, which for me, is TurboTax.

TRP said that once I inherited the shares, I would have to start paying taxes and/or take distributions of some kind and I am trying to figure out the details.

TRP said I should be able to find info on IRS.gov, but after several attempted searches, I could not find any relevant information, so I posted my question.

I do not mind paying taxes if I must. I just want to make sure why and how much is due and when.

THANKS in advance for any help. Especially if you can point me to relevant info on IRS.gov.

[Critter-3]

Turbo Tax is NOT a tax professional  ... it is only a DIY program and cannot/will not give any legal advice.  What you need to do is either consult a financial planner, a stock broker and/or a local professional knowledgeable in this subject matter  if you will not  do the research yourself.   Advice from a nameless faceless public forum is not your best choice especially since you have not given anywhere near enough information to even formulate an educated guess.  

[macuser_22]

It depends on the details that you have not provided - what type of account?   Were you co-owner on the account?   Were you the named beneficiary of the account?     Was the estate the benificuary and you are a benificuary of the estate?

[gw-hicks]

Dear Critter-3,

You are an idiot.

[M-MTax]

@gw-hicks Why don't you answer the questions so someone can help?

Is this account an IRA or retirement account?

Are you the named beneficiary if it's a retirement account? If it's a retirement account and no beneficiary was named then the estate is the beneficiary unless a will or testamentary document names a beneficiary.

The rules differ and the rule that applies depends on the answers to these questions.

[Critter-3]

@gw-hicks 

And you are a fool ... even if you answer the questions posted how do you know the instructions given here are  correct ?   

[M-MTax]

TRP said I should be able to find info on IRS.gov

Here: https://www.irs.gov/publications/p590b#en_US_2020_publink1000230538 and

https://www.irs.gov/retirement-plans/required-minimum-distributions-for-ira-beneficiaries

[Critter-3]

Are you saying this is an IRA account ?   Well that is a start.  Now are YOU the named beneficiary ?   

[fanfare]

@gw-hicks 

The 10 year rule for Inherited IRAs says

that by the end of 10 years you literally must close the account, withdrawing the funds into your own other account.

That is a total distribution, and the money becomes taxable.

That is the tax implication.

While the 10 year period is ongoing, you choose when and how much to take out, if any.

The 10 year rule applies to Inherited Roth IRAs also, but those distributions are not taxable.

[Critter-3]

https://www.coastalwealthmanagement24.com/estate-as-beneficiary-of-traditional-ira-or-retirement-pla...