Inherited IRA with 21 beneficiaries - what steps should I take now?

Thanks for the detailed response! I'm wondering about something - you mentioned the SECURE Act requiring withdrawal within 10 years, but I thought it was 5 years for inherited IRAs through a trust? Has this changed recently? Also, do all beneficiaries have to follow the same distribution schedule, or can some take lump sums while others stretch it out?

The SECURE Act changed the rules to generally require a 10-year withdrawal period for most non-spouse beneficiaries who inherited after January 1, 2020. However, if the original account owner died before the Required Beginning Date for their RMDs, then a 5-year rule might apply to certain trust situations. It gets complicated because the specific trust language matters. Regarding different distribution schedules, once the assets are transferred to each beneficiary's inherited IRA, they can generally make their own decisions about timing (within the required withdrawal timeframe). Some could take lump sums while others stretch it out to the maximum allowed period. Each beneficiary can follow their own preferred distribution schedule once they have control of their portion.

Did you find the tax analysis helpful for the individual beneficiaries too? I'm in a similar situation but worried about creating tax headaches for everyone involved if I make the wrong move. Was it able to handle state tax differences for beneficiaries living in different states?

I'm always skeptical of these online services. Did you end up having to talk to a real person or was it all just automated reports? I'm dealing with my mom's estate and need someone who actually understands the nuances of inherited IRAs, not just generic advice.

The tax analysis for individual beneficiaries was extremely helpful - it showed how different distribution strategies would impact each person based on their tax situation. It even flagged which beneficiaries would be pushed into higher tax brackets with certain distribution methods. It definitely handled state tax differences - I had beneficiaries in California, Florida and Colorado, and it accounted for the different state tax implications for each. This was actually one of the most valuable parts since I hadn't even considered how state taxes would complicate things. I was skeptical at first too, but they do have actual tax professionals who review everything. I started with the automated analysis, but then had a consultation with one of their experts who answered my specific questions about handling the charity portion and some concerns about a beneficiary who was on government benefits. It wasn't just generic advice - they addressed our unique situation.

How does this actually work though? I'm confused about how they can wait on hold for you - do they conference you in or something? And are you sure the IRS will actually discuss specific tax situations like this over the phone? I thought they only answered general questions.

Yeah right. This sounds like a scam to me. Why would I pay someone to call the IRS when I can do it myself for free? And even if you get through, the IRS reps usually just read from the same scripts we can find online. I doubt they'd give specific advice about inherited IRA distributions through a trust - that's complex tax law territory.

They basically have a system that navigates all the IRS phone menus and waits on hold for you. When they get a real person, they call you and connect you directly to the agent. No conference call - it's just you and the IRS agent talking. Yes, the IRS absolutely will discuss specific situations - that's a big misconception. They won't give you tax planning advice or tell you what decisions to make, but they will clarify how the tax rules apply to your specific scenario. The agent I spoke with confirmed exactly how to handle the reporting for the charity's portion and explained which forms were needed for the trustee-to-trustee transfers. I was skeptical too before trying it. But after wasting nearly 15 hours on unsuccessful hold times over two weeks, paying a service to save me from that headache was completely worth it. The IRS actually has very knowledgeable people - the problem is just getting to them. And no, they don't just read scripts for complex issues like inherited IRAs.

Thanks for bringing up the valuation point - I hadn't thought about documenting that specifically! Do you know if I need to get some kind of official valuation or is the statement from the financial institution as of the date of death sufficient? Regarding the trust language, it just says the IRA should be distributed "in equal shares" to the beneficiaries. There's no special language about tax-advantaged distribution methods. I'm wondering if this limits my options as trustee?

The statement from the financial institution showing the value on date of death should be sufficient, but make sure you keep multiple copies in different places. We had an issue where years later when a beneficiary needed to prove the basis, no one could find the original statements. I'd recommend getting a formal letter from the institution confirming the date-of-death value too if possible. With trust language specifying "equal shares" but no special provisions for tax-advantaged accounts, you likely still have some flexibility in HOW you distribute those equal shares, just not in the amounts. You could potentially still use different methods (lump sum for some, trustee-to-trustee transfers for others) as long as the value of each share remains equal. I'd recommend consulting with an estate attorney who specializes in retirement accounts to confirm, as the specific wording matters a lot.

Yes! We had this issue with my uncle's IRA. If beneficiaries want cash instead of an inherited IRA, the trustee can distribute directly to them, but they need to understand this is a taxable event. The full amount distributed will be taxable income to them in the year received (unless there were non-deductible contributions). The trustee should withhold taxes (usually 10% federal minimum, plus state if applicable) and will issue a 1099-R showing the distribution. Make sure they sign something acknowledging they understand the tax implications - we had one beneficiary come back later claiming he wasn't told about the tax hit and it created a huge family drama.

@Jasmine Quinn makes a great point about documentation! I'd also add that you might want to encourage those beneficiaries to at least consider opening inherited IRAs temporarily, even if they plan to take distributions quickly. They can open the inherited IRA, receive their portion via trustee-to-trustee transfer (no immediate tax impact), and then take distributions on their own timeline within the required withdrawal period. This gives them more control over the timing of the taxable event - maybe spreading it across two tax years to minimize the bracket impact, or waiting until a year when they have lower income. If they absolutely insist on immediate cash, make sure the withholding covers not just federal but also their state taxes. Some states have higher rates than others, and nothing creates family drama faster than someone getting a surprise tax bill they can't afford to pay!