Inheriting an IRA may seem like a good thing, but there can be tax consequences if you aren't careful. If you inherit an IRA, you should check with an attorney or financial advisor as soon as possible to find out your options.
In a recent Tax Court case entitled, Estate of Minnie Lynn Sower, Deceased, Frank W. Sower, and John R. Sower, Co-Executors, Petitioner v. Commissioner of Internal Revenue, Respondent (2017) 149 TC No. 11, the IRS was NOT precluded from auditing the estate tax return of the first spouse to pass away for purposes of determining the estate tax liability of the second spouse. The crux of the issue relates to the first spouse making an estate tax portability election.
Our attorneys and support staff are engaged in a diverse cross-section of subrogation matters. We are equipped to review and consider the underlying circumstances which gave rise to your subrogation claim, make appropriate recommendations and proceed, as required, to maximize any recovery to which we reasonably believe you may be entitled.
Grandparents may be tempted to leave an IRA to a grandchild because children have a low tax rate, but the "kiddie tax" could make doing this less beneficial.
An IRA can be a great gift for a grandchild. A young person who inherits an IRA has to take minimum distributions, but because the distributions are based on the beneficiary's life expectancy, grandchildren's distributions will be small and allow the IRA to continue to grow. In addition, children are taxed at a lower rate than adults—usually 10 percent.