Hi,
I was wondering if anybody here knows this answer. If an IRA is cashed out in the same tax year that an individual dies, are income taxes still owed on the proceeds or would those proceeds just count towards the estate and any potential estate taxes?
Long story short, I used to manage the finances for my aunt. Her health turned south and she moved in with my cousin (her son). In April of this year he liquidated and transferred her money from two Fidelity accounts (a rollover IRA and a taxable account) and the money was sent to her. I believe it was just put into a bank account in her name.
She passed away a week ago and my father and I are trying to figure out the tax implications of his actions. At the time I told my father that this action would trigger signficant tax implications unless they opened a new IRA account for her. My father didn't want to get involved. Now my father needs to help my other cousin (aunt's daughter) determine what she is owed from the estate.
I know my aunt would have owed income taxes on the IRA on her 2023 tax return however since she died this year I didn't know if that becomes null and now it just goes towards potential estate taxes which she won't have since her estate will be under the exemption.
Thanks for the help.
I was wondering if anybody here knows this answer. If an IRA is cashed out in the same tax year that an individual dies, are income taxes still owed on the proceeds or would those proceeds just count towards the estate and any potential estate taxes?
Long story short, I used to manage the finances for my aunt. Her health turned south and she moved in with my cousin (her son). In April of this year he liquidated and transferred her money from two Fidelity accounts (a rollover IRA and a taxable account) and the money was sent to her. I believe it was just put into a bank account in her name.
She passed away a week ago and my father and I are trying to figure out the tax implications of his actions. At the time I told my father that this action would trigger signficant tax implications unless they opened a new IRA account for her. My father didn't want to get involved. Now my father needs to help my other cousin (aunt's daughter) determine what she is owed from the estate.
I know my aunt would have owed income taxes on the IRA on her 2023 tax return however since she died this year I didn't know if that becomes null and now it just goes towards potential estate taxes which she won't have since her estate will be under the exemption.
Thanks for the help.