My father died with a trust but without it listed as beneficiary on his IRA. It just finished the probate process and the CA court ordered the estate funds to be transferred to the Trust, as his will directed, and the estate terminated. Does the Estate IRA get liquidated and distributed into an Estate savings account first, meaning all tax liability falls on the Estate, before the funds can be transferred into the Trust? I have been told 2 different things.
Going to the estate first means it has to surrender HALF the funds to federal and state taxes. Transferring it into a Trust IRA instead would mean the trust beneficiaries could receive look-through tax liability. But I'm starting to think this route might not be possible, at least not in CA! Please tell me there's a way around this 50% tax situation... Thank you.
I was hoping someone in California could quickly answer this question. As I said, I've heard different things. The attorney couldn't answer the question.
Btw, a CPA ended up doing a look-through situation with a K-1 to the trust for the full 1099-R income amount so that the estate owed zero taxes and it fell on the trust, who donated it to charities, so no taxes were due there either. Hope that sounds right to everyone!!!