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Dear Tax Talk,
My mom recently died (June 2011), and I am the executor named in her will. She has several IRAs, and I have been told to get a tax ID number. My concern is that I owe taxes to the IRS. How will this affect the money my mom has in her IRA? Should I get another sibling to be executor of the account that does not owe taxes? I am on a payment plan and will pay in full once my share is distributed from the IRA.
Your personal tax debts do not interfere with or attribute themselves to the assets of your mom’s estate either by your interest as a beneficiary or your position as the executor of will. Generally, you would apply for a tax identification number for the estate if it will go through probate or have income.
An IRA usually has a beneficiary designation. When the IRA owner dies, the beneficiary designation controls the disposition. For example, your mother’s IRA may say that all or part of the IRA should be paid to her child(ren). Because the IRA passes directly to the beneficiaries, the estate would not include them in income. Each beneficiary is responsible for including the IRA in their income when distributed.
If IRAs are her only assets, then there is no need for probate as the assets pass through designation. Because probate costs money, you could avoid this expense by not opening an estate proceeding unless other assets are involved. If there are other assets or probate, then it would be appropriate to apply for a tax identification number on Form SS-4. You should also complete and file Form 56.
The primary duties of a personal representative are to collect all the decedent’s assets, pay the creditors, and distribute the remaining assets to the heirs or other beneficiaries. While this sounds simple, it can get complicated, so I highly recommend you hire a good CPA and attorney to help you through the probate process.
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.