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  1. #1
    Join Date
    Dec 2009
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    2

    Default Is a Beneficiary of an IRA Liable for Tax and Child Support Debt

    My question involves estate proceedings in the state of:California
    My father passed away about a month ago and I am the beneficiary on about a $70k IRA. He owed $23k to the IRS, $14k to CA state tax, and $22k for back child support. He had no will or trust and no assets aside from an old bass boat and an SUV, neither of which are in working order. Are the previously mentioned agencies entitled to the IRA? I am dividing the IRA amongst 3 siblings and I'm afraid if I liquidate the assets they will come after me. Any help would be greatly appreciated!

  2. #2
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Is a Beneficiary of an IRA Liable for Tax and Child Support Debt

    The administrator of his estate will notify creditors of the death and their need to make claims, which will be satisfied from the assets of the estate. The IRA would normally pass to a named beneficiary outside of the estate. Normally you would want to roll it over into your own IRA to avoid having to pay income taxes on the money. If you're the only beneficiary and are choosing to split the money anyway, you need to consider the taxes when calculating the amounts to distribute.

    Without more information about the probate proceedings, any liens, etc., I'm not going to speculate as to what might happen.

  3. #3
    Join Date
    Apr 2009
    Posts
    757

    Default Re: Is a Beneficiary of an IRA Liable for Tax and Child Support Debt

    Normally you would want to roll it over into your own IRA to avoid having to pay income taxes on the money.
    For a non-spouse beneficiary, rolling it into an IRA (new or existing) in the beneficiary's name would be deemed a complete distribution. The IRA would need to re-titled as a beneficiary IRA (for example, "The John Smith IRA, deceased, for the benefit of Dave Smith") to avoid having the entire amount considered as a distribution and subject to income tax immediately, and enable the beneficiary to stretch the required distributions using the beneficiary's life expectancy.

  4. #4
    Join Date
    Dec 2009
    Posts
    2

    Default Re: Is a Beneficiary of an IRA Liable for Tax and Child Support Debt

    Thank you for the replies. I've read up on the different ways to roll the assets over and it looks like my best option is going to be the beneficiary IRA and beyond that I think I'm going to have my CPA guide me as to how to distibute the funds amongst my siblings.
    I think he owes money to utility companies but he didn't have credit cards or loans with outstandind balances. I'm not aware of any liens. My informational dead end lies with the three goverent agencies and what they can do. Obviously they couldn't touch his IRA while he was alive but I don't know if him passing changes the game.

  5. #5
    Join Date
    Aug 2009
    Posts
    121

    Default Re: Is a Beneficiary of an IRA Liable for Tax and Child Support Debt

    If he listed you as beneficiary IN THE IRA -- not somewhere else -- then it passes to you outside the estate. Creditors can collect from the estate but not from you.

    (I am not an attorney.)

    Edward

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