SEP IRA

Question: inheritance tax questions?

I have multiple questions and while I do have an attorney who is handling the estate he’s confuses me So if anyone can give me simple answers/websites it woud be greatly appreciated thank you.
Basics: there are 3 beneficiaries, there are 3 life insurance policies,an IRA, a 401k and a pension as well as multiple other accounts (cd’s mutual funds etc)
the estate is in probate, however I have begun to recieve checks from the life insurance as well as from his personal accounts.
now for the questions
1> are the life insurance policies taxable
2> would it be better to leave the monies from his personal investment portfolio intact or do they need to be “cashed out”
3>He was a retired navel officer is he entitled to those benefits
4>Does the estate recieve Social Security benefits? (when my mom died we did but we were all under 18)
can we pay any and all taxes and then distribute the funds or should we distribute the funds and pay the taxes individually?

Answer: This is a confusing subject. Allow me to help.

1> are the life insurance policies taxable.

A. Life insurance proceeds are definitely not taxable!!!!!!!!

2> would it be better to leave the monies from his personal investment portfolio intact or do they need to be “cashed out”

A. Not sure what you mean. He no longer has his own accounts. Whatever was in them is now in the estate. Keeping anything in an estate longer than necessary is a very bad thing. Moving them to the accounts of the beneficiaries as soon as possible is the best. Whether you keep the investments in the same vehicles is up to the beneficiary. Translation: if he has shares of Altria, whether the beneficiaries keep the shares or sell them is purely at the discression of the beneficiaries. There really is no tax issue since the basis of the shares will be whatever they were worth at the day of death.

3>He was a retired navel officer is he entitled to those benefits.

A. You lost me here. Is he entitled to what benefits?

4>Does the estate recieve Social Security benefits? (when my mom died we did but we were all under 18)

A. Definitely not. When the person receiving SS dies, so do their payments. A surviving spouse or qualifying child can receive their own benefits, but you don’t sound like a qualifying child.

Q. Can we pay any and all taxes and then distribute the funds or should we distribute the funds and pay the taxes individually?

A. The estate pays all estate taxes prior to distribution of funds. The only taxes the beneficiaries pay is for certain non-probate items like IRAs and 401k which do not go through the will or probate. They go directly to whomever the beneficiary of the account said they should go to. The beneficiary has choises on how to handle it, but any withdrawals will be taxed by the beneficiary. The laws are changing allowing more flexibility in rolling them over into your own plans, but I haven’t been following them as closely as I should. I know inhearited IRAs used to have to be withdrawn within 5 years, but I hear that is changing. Not sure with 401ks.

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