How are estate taxes handled when all assets are in brokerage/IRA accounts with designated beneficiaries?

12 Thanks for this explanation. Quick follow-up question - what happens if the beneficiaries have already spent the money by the time the IRS comes looking for the estate taxes? And roughly how long after someone's passing would the estate tax need to be paid?

8 If beneficiaries have already spent the money, they're still liable for their portion of the estate tax. The IRS doesn't particularly care if the money is gone - the tax obligation remains. They can pursue collection actions just like any other tax debt. As for timing, an estate tax return must be filed within 9 months of death, though extensions are possible. The tax is also due at that 9-month mark, though the executor can request installment payments in some cases. This timeline is why it's critical for the executor to act quickly to ensure assets aren't fully distributed before tax obligations are addressed.

7 How does this actually work with accounts that have named beneficiaries? My dad has everything set up with TOD (transfer on death) designations, and I'm worried the money will be distributed before we even realize there's an estate tax issue.

19 I've seen so many of these "miracle tools" that promise to solve complex tax situations. Did it actually help with the paperwork filing process or just the calculations? And what about state estate taxes - did it handle those too?

15 It actually has a feature specifically for TOD and beneficiary accounts - it helps create the proper notification letters to send to financial institutions before distributions occur. That way they know to hold the funds until the estate tax situation is resolved. Saved us from a potential nightmare. For the paperwork question - yes, it helped with both. It generated draft letters to financial institutions and helped compile the information needed for Form 706. The system handles state estate taxes too - it identified that we had exposure in two states and calculated the different exemption amounts for each state. Really comprehensive.

6 Wait, this actually works? I thought it was impossible to get through to the IRS these days. How much did this service cost you? I've been trying to get answers about my grandfather's estate tax situation for months.

19 I'm extremely skeptical about this. The IRS is notoriously difficult to reach - how exactly does this service get you through when no one else can? Sounds too good to be true. Did they actually provide you with specific guidance or just general information you could find online?

22 Yes, it absolutely works! The service uses some kind of technology that navigates the IRS phone tree and holds your place in line. When they finally get through to a human, you get a call connecting you directly to the agent. As for the specific guidance - the IRS agent reviewed our particular situation and explained the exact process for filing Form 706 when there are accounts with beneficiaries. She told us we needed to file a specific notice with each financial institution and gave us the exact timeline to prevent distributions until the tax situation was resolved. It was detailed advice specific to our situation, not generic info.

17 Which states actually have these lower estate tax thresholds? Is there a simple list somewhere? My parents have property in multiple states and I'm trying to figure out if this is something we need to worry about.

3 As of 2023, the states with estate taxes are: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. The exemption thresholds range from around $1 million (Massachusetts, Oregon) to $9.1 million (Connecticut). Some states also have inheritance taxes, which are different - they're based on who receives the assets rather than the total estate value. Those states are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland actually has both types of taxes! If your parents have property in multiple states, you definitely need to look into each state's rules. The concept of "domicile" becomes really important in determining which state's laws apply.

8 Yes, you would be personally liable in two ways. First, as the executor, you have a fiduciary duty to handle the estate properly, which includes paying taxes before distributions. Second, as a beneficiary receiving assets from a taxable estate, you have transferee liability for your proportionate share of estate taxes. The IRS can come after you both as the executor who failed to ensure taxes were paid and as the beneficiary who received assets that should have been used to pay taxes. I strongly recommend getting professional help with this situation to avoid serious personal liability.