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If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

I'm the executor for my Aunt's estate. I am filing out the Form 1041 and 2 K-1's.  She died in July 2015 and did not have a beneficiary named for her IRA. I received a 1099R in the estate's name showing a total lump sum distribution of her IRA. She also had an annuity but the beneficiary predeceased her. The annuity was paid in a lump sum distribution also to her estate in 2015 and I received a 1099R. She left a will that instructs the contents of her estate to be distributed equally between myself and my brother (50/50). My question is, for both the IRA and Annuity amounts that were distributed as income to the estate, does the estate pay the taxes on these amounts or is that income reported to myself and my brother as income required to be distributed currently on our K-1's and we then pay taxes on the income?


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Level 15

If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

Either the estate can pay the taxes and distribute this portion of the residue of the estate to the beneficiaries tax free, or the income can be passed through to the beneficiaries on Schedule K-1 (Form 1041) to be taxed on the beneficiaries' tax returns.  Unless the amount involved is small, it's usually beneficial to pass the income through due to the rapidly increasing tax brackets of the estate.  For 2015, the maximum estate tax rate is reached at $12,300 of estate taxable income.

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Level 15

If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

Either the estate can pay the taxes and distribute this portion of the residue of the estate to the beneficiaries tax free, or the income can be passed through to the beneficiaries on Schedule K-1 (Form 1041) to be taxed on the beneficiaries' tax returns.  Unless the amount involved is small, it's usually beneficial to pass the income through due to the rapidly increasing tax brackets of the estate.  For 2015, the maximum estate tax rate is reached at $12,300 of estate taxable income.

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New Member

If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

What if taxes are deducted from the distribution, and you pass thru on Schedule K-1 does the tax deduction already paid also go on the K-1
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Level 15

If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

From the instructions for Form 1041 line 24e:

"Except for backup withholding (as explained below), withheld income tax can't be passed through to beneficiaries on either Schedule K-1 or Form 1041-T."

(Back-up withholding is withholding required by the IRS, generally as a result of a history of past underpayment of tax:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p1335.pdf">https://www.irs.gov/pub/irs-pdf/p1335.pdf</a>)

The estate would have to obtain a refund of excess withholding and distribute it to the beneficiaries.
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New Member

If a beneficiary is not named for an IRA or an Annuity and the total lump sum distributions goes to their estate does the estate pay the taxes due on that income?

I have a similar situation with an annuity that was opened in the name of the trust.  After my father passed the trust states to split the funds in to three equal parts to the children.  The annuity company states if I do not withhold any taxes they would send a 1099R at the end of the year to the estate.  So would the estate pay the taxes because of the 1099R or would it be up to  each beneficiary to pay their share of the taxes.  The claim form asks if I want to withhold a percentage of funds for federal and state taxes or withhold nothing.  Do not want to pay taxes twice of the funds--one for the estate and one for the beneficiary.  Which way is better?