[GNC] Accounting FOr Beneficiary Income

[Dave Gilmore]

Hey Stan,

Thank you for your condolences


> Hopefully you did that in your name _as_beneficiary_ of your mother.
>
I worked with the broker who was handing the account for my mom (it's a 
major brokerage) to make sure everything was done correctly. My mom had 
named me beneficiary on every account she had, so nothing ended up in 
probate.
> I'm guessing that your mother died in 2019? If by any chance she died in
> 2020, the above rules are still in effect but you no longer use the
> life-expectancy tables to compute a Required Minimum Distribution.
> Instead, you have 10 years to drain the IRA, on whatever schedule you
> choose.
She passed on the 5th of January this year. She had already declared a 
specific amount she was going to withdraw for this year and I have to 
keep that going.  After the year is up I am going to adjust the 
disbursements to fit my financial needs for my current season of life. 
Right now, I plan to take most of it and put it into a Roth as it is 
disbursed. This is before I have had any real planning meeting with the 
advisor, mind you, so that isn't set in stone
> investments: Assets:Investments:Mother's IRA. Your transaction will
> debit that account by the value of the IRA. You're not required to
> follow Generally Accepted Accounting principles, so the credit account
> in that transaction is up to you. Here are some options:
> * Your main equity account.
> * Equity:Extraordinary Income
>    (one account for this and other large one-time entries)
> * Equity:Inheritance(s)
> * Income:Inheritance(s)
> * Income:Miscellaneous

Right now, the transactions go as follows:

IRA Account -> Brokerage Checking Account (some requirement - I forget 
why right now) -> Personal Checking Account (later some of this will go 
into a Roth as well).

IRA Account -> Federal Taxes (still working on the state tax estimate)

I guess my hangup was that I felt I needed to show it as income since 
taxes were being taken out as part of the disbursement. But - thinking 
it through with your help - it's not like this money is coming from a 
3rd party like an employer or a client. It's already my money, so it's 
an asset right?

>
> Here's my answer to a related question that you didn't ask:
> Your mother's IRA, like your other investments, will grow or shrink over
> time. Those changes don't affect your income tax. But over time, the
> balance in GnuCash Assets:Investments:Mother's IRA will get further and
> further out of step with the balance in the actual account at the
> brokerage. Since there's no need to keep track of profit and loss in an
> IRA, I resolve this by checking the balance at Vanguard every three
> months, and then I debit Assets:Investments:My IRA and credit
> Equity:Unrealized Gains/Losses. (If the IRA is down, the credit and
> debit are reversed. If you enter negative numbers, GnuCash does that for
> you automatically.)
Thanks for this. You're right - it was a question I knew needed an 
answer but hadn't gotten that far yet
>
> Maybe it bothers you that your income on your tax return doesn't match
> your income in GnuCash?
Something like that. I was picturing having to report where all my money 
came from for the year. So, because I was getting money from something 
and paying taxes on it I thought that meant the transaction should be 
classified as income. But, it sounds like it's just an account transfer 
that costs me taxes to do so to speak
> Unless your mother's estate is large enough that you need to be
> concerned with Federal or State estate tax, these refunds won't flow
> into taxes.

Nah, it was pretty simple. And the amounts of the refunds on these 
accounts are pretty small.

Thank you for your very well thought out response

Dave