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When an IRA is liquidated prior to the death of the owner, does it become part of the estate. There is a trust that states 1/3

Sacramento, CA |

My mom died in 2012. She had an IRA worth over $400,000. She liquidated the IRA and put in in a regular checking account. There are 2 step siblings that share in the trust. they want me to share the money with them. I was left as beneficiary to the original IRA and I am the Trustee of the Trust. Do they get a share

Attorney Answers 3


  1. If your mother liquidated her IRA and deposited the money in her checking account it is her money and it doesn't matter where it originated. One issue is income tax - there will probably be a huge income tax bill for 2012 since it was a lump sum distribution. As to the estate, what happens to the money now in the checking account depends on her estate planning documents (if any): You indicate there is a trust so if there is a pour over will/living trust it is likely the funds go into the trust and the trust controls the distribution. The only thing that "could" change things would be if she was not competent to liquidate the IRA, but that is very difficult to prove in most cases so that's probably an uphill battle.

    I would hire an attorney to review the matter.

    This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website: http://www.stevenzelinger.com/


  2. The IRA is no longer an IRA and, as such, is not beneficiary designated. So, unless you are listed as a beneficiary on the regular checking account, the old IRA assets are probate assets that flow to the trust --- after all of the taxes are paid. Taxes on an IRA are generally paid as funds are distributed. Since your mother liquidated the IRA, tax on the assets liquidated would have to be paid on her final 1040. Although you are the trustee of the trust, this does not entitle you to the assets. The assets from the old IRA and anything else poured over into the trust from probate must be divided per the terms of the trust. It's more likely than not that you and your siblings will share the trust assets. Please consult a CPA re the tax on the IRA. If an estate hasn't been opened, one should be opened and someone should be appointed executor or personal representative. Please consult an estate administration attorney.


  3. I concur with my colleagues. If the funds were properly liquidated (your mother had the proper capacity to liquidate the IRA), then the funds were no longer IRA funds on her passing. Be sure that the 2012 tax return properly addressed the IRA liquidation. As for distribution of the funds after the liquidation, that distribution is going to be controlled by your mother's testamentary / trust documents. If she did not have proper documents in place, then the distribution is controlled by the laws of intestate succession. Your best bet, at this point, is to consult with a local estate / probate attorney for an in depth analysis of your particular facts.

    ** LEGAL DISCLAIMER ** My response above is not legal advice and it does not establish an attoreny-client relationship. When responding to questions posted on Avvo, I provide a general purpose response based on California law as I am licensed in California. In reviewing my response, you are specifically advised that your use of, or reliance upon any response I provide is not advisable. I do not have all relevant background details or facts related to your issue / matter, thus I am not in a position to give you legal advice. Further, your review, use of, or reliance upon my response does not establish an attorney-client relationship between us nor does it qualify as a legal consultation for any purpose. For specific advice regarding your particular circumstances, you should consult and retain local counsel. Law Offices of Eric J. Gold www.EGoldLaw.com Telephone: 818-279-2737 Email: service@egoldlaw.con

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