Legal Question in Wills and Trusts in New Jersey

Re: ira-part of an estate

You will need to examine the IRA documents and verify who was the OWNER of each IRA account, and who is the BENEFICIARY.

Generally speaking, taking a lump sum is not advisable because you will pay income tax on the entire distribution , all in one tax year [at your top marginal income tax rate] and you will lose the ability to grow the IRA tax free over your lifetime, taking only the minimum requierd distributions. Paying the IRA to the estate is also not advisable [again, you will need to review the IRA beneficiary designation].

Re: ira-part of an estate

Even with a named beneficiary, the value of the IRA is included as part of the pssibly taxable estate. Since the IRA represents untaxed, deferred income, the beneficiary of the account assumes the income tax consequence that otherwise would have been paid by the decedent, if paid to the decedent while still alive. The question is when are these taxes paid, and the rate of tax depends upon the totaqlity of your other income in the year of receipt (this is considered ordinanry income and is taxed at whatever rate is applicable to your total net-taxable income. If you are eligible to "roll-over" the account, the income taxes may be deferred until you actually liqidate the account. You should check with the account holder if a roll-over can be done.