Hi Heather:
My wife from my second marriage passed away in March. I am the executor of her estate and trustee for her children’s inheritance (mainly a nearly paid-off house).
However, she had some money in IRAs that are being transferred into inherited IRA accounts so we can access money the kids may need without having to liquidate their biggest/best asset/investment - the house.
But because of the nature of these accounts, they were considered to be held outside of probate in my state and went to me, her spouse, at her passing.
I intend to honor her wishes that these funds go to her kids. But I’m also a not-so-highly paid government employee and every dollar disbursed from the account will be viewed by the IRS as income to me in the year it is withdrawn.
I’m not worried about the tax liability. The estate attorney said if it makes a significant difference to the tax I have to pay, I can charge the difference to the estate as an expense.
But I still have several years to go in my Public Service Loan Forgiveness program and I can’t afford my monthly payments to be artificially inflated for this reason.
If I can demonstrate that any disbursements went straight into the kids’ trust account, is there a way for this to NOT be considered income for PSLF purposes?
Thank you for your help.
- jeff