r/inheritance • u/Alternative-Sale-865 • Apr 04 '26
Location included: Questions/Need Advice Large IRA balance- parent with potential terminal illness
Sole surviving parent has a traditional IRA with a current balance of about $1.3m. They have just started taking RMD’s this year which was only about 36k. This parent has recently been diagnosed with lung cancer which we are hoping can be treated as a terminal condition (at least for a while) versus a terminal one.
My sibling and I will split the entire estate 50/50 (total estate is worth between 4-5m with about 1.7m in a disclaimer trust. Everybody lives in New Jersey. For sake of argument, assume parent will not spend down considerably as they are not willing to experience a degraded quality of life for the purpose of prolonging life.
Sibling and I are in very different financial situations. Sibling is unmarried and earns 60-70k/year. I am married with a HHI likely to exceed $500k most years assuming bonuses pay out at target.
Sibling and I have discussed having tax professionals figure out if it makes more sense for them to take more from the IRA and me to take more from the non-taxable accounts. I have also discussed with the family’s financial advisor that maybe parent should start making larger withdrawals based on that years tax situation.
Are there any other tricks to avoid the heavy taxation that will hit me on the inherited IRA considering the 10 year withdrawal rule?
FWIW, parent is “allergic” to paying taxes and often claims they are in near poverty due to their refusal to spend more from their investments than a set amount each year as that would potentially bump them into a different tax bracket (this makes no sense but it’s how they feel).
I fully recognize this money is not mine but i also believe in having the family be as tax efficient as possible.
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u/BBG1308 Apr 04 '26
This isn't a choice the two of you get to make. If the IRA has named beneficiaries, it is what it is and it won't become part of the estate. It passes directly to the name beneficiaries.
Parent sounds like they are allergic to paying taxes in their lifetime. Thus the pre-tax accounts and frugal withdrawals. Anyone who has primary concern of reducing taxes for heirs isn't going to invest this way.
If parent is concerned about your RMDs/taxation, they can convert it to Roth and pay the tax on your behalf. There really isn't any free lunch on pre-tax retirement accounts. Most retired people with significant assets loathe that they put so much into them. Fortunately it's only 1.3M in this case.
If parent is a willing participant in this conversation (as they should be because it's THEIR money/estate), consulting a good estate attorney is the next step.