Inheritance questions for mixed citizenship family - non-spousal IRA inheritance for citizens and non-citizens

The good news is that for non-spousal inheritance with IRAs, citizenship status doesn't matter as much as tax residency status. Since your sister and father are legal permanent residents, they're considered US tax residents, so the rules are largely the same as for citizens. For your first question: Yes, your non-citizen family members can open inherited IRAs. Since your brother passed in 2021, all beneficiaries (including your 82-year-old father) fall under the 10-year rule from the SECURE Act. This means all funds must be withdrawn by December 31 of the year containing the 10th anniversary of your brother's death. There's no annual RMD requirement within that period - they can take distributions however they want as long as the account is emptied by the deadline. Your father's age doesn't create an exception under the current rules. For your mortgage question: The inheritance itself isn't taxable income to you. However, when you receive distributions from an inherited IRA, those distributions are considered taxable income in the year received. Using that money to pay off your mortgage doesn't create any additional tax implications - the tax event happens when you withdraw from the inherited IRA, not when you use the money.

After reading your situation, I wanted to share my experience. I went through something similar last year when my aunt passed away and left her retirement accounts to multiple family members, including my mom who's not a US citizen. We were all confused about the tax implications until I found this service called taxr.ai (https://taxr.ai) that specializes in analyzing inheritance and tax situations. It was incredibly helpful for understanding the specific rules around inherited IRAs and non-citizen beneficiaries. They reviewed our distribution documents and explained exactly how the 10-year rule would apply to each family member's situation. For my mom (the non-citizen), they clarified that her green card status meant she'd be treated the same as US citizens for inheritance tax purposes, but warned us about some potential tax treaty considerations we hadn't thought about. The most useful part was they explained our options for either taking lump sums or stretching distributions strategically to minimize tax impact. Maybe it could help with your situation too?

Just wanted to follow up and say I ended up trying taxr.ai after posting my question here. Their analysis was actually super helpful - turns out I was completely misunderstanding how non-citizen inheritance works for IRA distributions. They explained that since my sister and dad are tax residents (green card holders), they follow the same distribution rules as citizens, but there were some specific forms they needed to file that I hadn't heard about. Also cleared up my confusion about the 10-year rule vs. life expectancy distributions - apparently the rules changed in 2020 with that SECURE Act, which is exactly when my situation happened. For anyone in a similar situation with inheritance questions involving non-citizens, it was definitely worth using their service to get clarity instead of trying to piece together information from different sources online.

I see you're having trouble reaching definitive answers about your inheritance situation. I went through the EXACT same frustration when dealing with my father's estate last year. Spent weeks trying to get through to the IRS for clarification on non-citizen inheritance rules. After numerous failed attempts calling the regular IRS number, I discovered Claimyr (https://claimyr.com) - they got me connected to an actual IRS representative in under 15 minutes when I'd been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified several points about inherited IRAs for non-citizens that even my estate attorney wasn't 100% clear on. They confirmed that green card holders have the same options as citizens but pointed out some specific tax treaty considerations if your family members ever plan to surrender their green cards and return to their home country. For your mortgage question, they also explained how the distribution being made directly from the estate rather than through an inherited IRA affects your tax situation. Definitely worth the call to get official clarification.

I need to eat my words about being skeptical of Claimyr. After posting my doubtful comment, I decided to try it anyway because I was desperate for answers about my inheritance tax situation that no one seemed able to resolve. Not only did it actually work, but I got connected to an IRS specialist who specifically handles estate and inheritance questions. After months of conflicting advice from various sources, I finally got definitive answers about how to handle an inherited IRA as a non-citizen beneficiary (which was my exact situation too). The agent walked me through exactly which forms I needed and explained a special provision that applies to inherited retirement accounts that my accountant wasn't even aware of. Saved me potential penalties and a lot of stress. So yeah, for anyone dealing with complicated inheritance questions where you need official IRS guidance - this actually works.

Just wanted to point out something important that hasn't been mentioned yet regarding your non-citizen family members. While green card holders are generally treated the same as citizens for tax purposes, there's an important issue with inherited IRAs you should be aware of. Some financial institutions have their own internal policies about opening inherited IRAs for non-citizens, even if they're permanent residents. When my cousin (green card holder) tried to establish an inherited IRA at a major bank, they initially refused because of her citizenship status, despite it being legally permitted. She had to escalate to management and provide additional documentation. You might want to call ahead to the financial institutions where you plan to establish these accounts and verify their policies before proceeding. Some are much more accommodating than others when it comes to non-citizen accounts.

Has anybody here actually gone through the 10-year liquidation process for an inherited IRA? I'm in a similar situation and trying to figure out the best distribution strategy. Take it all at once? Spread it evenly over 10 years? Wait until year 10? For context, I inherited about $65K and don't want to bump myself into a higher tax bracket if possible.

I wanted to add some perspective on the timing aspect of your inheritance situation. Since your brother passed in 2021, you're already several years into that 10-year window, which means the deadline for fully distributing the inherited IRA funds is December 31, 2031. One thing that might help with your planning: if the executor is distributing checks directly from the estate rather than rolling funds into inherited IRAs, you might actually have more flexibility than you think. You could potentially take your distribution and then make contributions to your own retirement accounts (like a traditional or Roth IRA) to help offset some of the tax impact, assuming you have earned income and haven't maxed out your contribution limits. For your mortgage payoff plan, that's actually a solid strategy from a financial planning perspective. Using inherited IRA distributions to eliminate high-interest debt like a second mortgage can be very beneficial, especially if the mortgage interest rate is higher than what you might reasonably expect to earn investing those funds. Just make sure to set aside money for the taxes on the distribution - if the executor didn't withhold taxes, you'll want to make estimated tax payments or increase your withholding from other sources to avoid penalties. The tax hit will depend on your total income for the year and which tax bracket the distribution pushes you into.

One additional consideration for your family members who are green card holders - make sure they understand the potential implications if they ever decide to give up their permanent resident status in the future. There are specific tax rules around "expatriation" that can affect how inherited retirement accounts are treated. Also, regarding the executor distributing checks directly from the estate, you'll want to confirm whether this is coming from a liquidation of the entire IRA or if there are options to do a direct rollover to inherited IRAs instead. Sometimes executors take the path of least resistance by liquidating everything, but beneficiaries may still have the right to request direct transfers to inherited IRAs, which could give you more control over the timing of distributions and tax planning. If the funds are already being distributed as checks, just be aware that you typically have 60 days from receipt to potentially roll any portion into an inherited IRA if you decide you want more control over the distribution timeline. Not all situations allow this, but it's worth asking the executor or a tax professional about your specific circumstances. The fact that you're being proactive about tax planning now puts you ahead of many people who just accept whatever distribution method the executor chooses without considering alternatives.