Inherited IRA split between siblings can be a complex and emotional issue, especially when it comes to dividing the assets fairly. As the executor of an estate, it is crucial to understand the rules and regulations surrounding inherited IRAs and how they should be divided among siblings. This article aims to provide an overview of the process and offer some guidance on how to handle this sensitive matter with care.
The first step in splitting an inherited IRA between siblings is to determine the type of IRA being inherited. There are two main types: traditional IRAs and Roth IRAs. Each type has different rules and tax implications, which must be considered when dividing the assets.
For traditional IRAs, the deceased individual’s beneficiaries are required to take minimum required distributions (MRDs) each year. The MRDs are calculated based on the account owner’s life expectancy and are subject to income tax. When splitting a traditional IRA between siblings, the executor must ensure that each sibling receives their share of the MRDs according to their respective life expectancies.
In contrast, Roth IRAs are tax-free at withdrawal, but the rules for splitting the assets are similar to those of traditional IRAs. Beneficiaries must take MRDs based on their life expectancies, and the distributions are not subject to income tax.
To split an inherited IRA between siblings, the executor must first obtain a copy of the deceased individual’s IRA account statement. This statement will provide the necessary information to calculate the MRDs for each sibling. The executor should then contact the IRA custodian to request a direct transfer of the inherited IRA assets to each sibling’s own IRA account.
It is important to note that the siblings have the option to roll over their inherited IRAs into their own IRAs, which can provide more flexibility in managing the assets. However, they must do so within 60 days of receiving the inherited IRA assets to avoid any potential penalties.
When dividing an inherited IRA between siblings, it is essential to maintain open communication and fairness. Here are some tips for handling this process with sensitivity:
1. Discuss the matter with all siblings in advance to ensure everyone is aware of the process and expectations.
2. Consider each sibling’s financial situation and life expectancy when determining the appropriate MRDs for each.
3. Be transparent about the rules and regulations surrounding inherited IRAs to avoid misunderstandings.
4. Offer assistance and guidance throughout the process to ensure a smooth transition.
In conclusion, splitting an inherited IRA between siblings can be a challenging task, but with careful planning and open communication, it can be managed successfully. By understanding the rules and regulations, maintaining fairness, and offering support, executors can help ensure that the inherited IRA assets are divided equitably among the siblings.
