IRA (Independent Retirement Account) - Plans to Reduce IRA Taxes
How the Stretch IRA in Estate Taxes, 401k Plans, and Inheritance Affect You We briefly describe the significant taxes that can be imposed upon a highly appreciated IRA coupled with associated estate taxes compounding the problem of the inherited taxes.
The best rescue plan should provide retirement solutions and strategic plans for your assets including real estate assets and stock portfolio in order for you to control how your sizable money will flow to your children and heirs.
Implementing a good, solid, strategic retirement plan is the best way to control your assets.
Life is a matter of probabilities.
Every time you get into a car, plane, bus, or train, there's a small, but measurable chance that you will have an accident.
It doesn't take an Einstein to understand the high probability that if you are over the age of 60, and you have an estate tax problem, and you die with an IRA, 77% of your money will go to the government and only 23% will go to your heirs.
This type of disaster is totally avoidable.
Invidual Retirement Account from 401K Plan, Profit Sharing Plan or Defined Benefit Plan An Individual Retirement Account (IRA) is nothing more than a non-forfeitable Trust.
Contributions are legally limited, however there are no limitations on conversion from a 401K or other pension plan to an IRA.
If you were an executive of corporate America, upon retirement you most likely converted your 401K plan, or your Profit sharing Plan, or your Defined Benefit Plan to an IRA.
If you have a highly appreciated IRA and you have an estate tax problem, here's what happens if you die with a $3million dollar IRA.
If you have an estate tax problem and you die without a good rescue plan, the Federal and State taxes will be up to seventy-five percent of your inheritance or $2,251,800 in total taxes.
In other words, your heirs will inherit as little as twenty-five percent or $748,200.
Stretch IRA Problems Most advisors cure this problem with the Stretch IRA.
In other words, Stretching the IRA distributions over a longer life other than the owner, usually someone younger, i.
e.
Grandchild.
Stretch IRAs are a good idea for someone who does not have an estate tax problem.
They are a bad choice for those who have an estate tax liability.
Why does it not work in these situations? Because when this Stretch IRA passes to a younger heir estate taxes are due.
If the younger heir receives a $3 million dollar IRA there would be a $1,500,000 estate tax due.
Where is the young heir going to get $1,500,000 to pay the IRS? The presumption is that the heir will take the $1,500,000 out of the account.
When the heir takes out $1,500,000 from this account then it's taxable income and income taxes are due on that money.
This creates a vicious cycle that can be avoided with a good rescue strategy.
You can choose a better way to avoid the 77% estate and inherited tax problems.
Disclosure: The exact calculation of income taxes due are complex, and are dependent on your income tax bracket, the composition of your income, and your applicable state taxes where your assets are domiciled.
If you have estate tax problems, and you have sizable IRA assets, you can almost guarantee double taxation on your death.
You should call a professional who handles such matters for an in-depth analysis of your personal or family's situation.
This statement is required by IRS regulations (31 CFR Part 10, §10.
35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.
S.
Federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
The best rescue plan should provide retirement solutions and strategic plans for your assets including real estate assets and stock portfolio in order for you to control how your sizable money will flow to your children and heirs.
Implementing a good, solid, strategic retirement plan is the best way to control your assets.
Life is a matter of probabilities.
Every time you get into a car, plane, bus, or train, there's a small, but measurable chance that you will have an accident.
It doesn't take an Einstein to understand the high probability that if you are over the age of 60, and you have an estate tax problem, and you die with an IRA, 77% of your money will go to the government and only 23% will go to your heirs.
This type of disaster is totally avoidable.
Invidual Retirement Account from 401K Plan, Profit Sharing Plan or Defined Benefit Plan An Individual Retirement Account (IRA) is nothing more than a non-forfeitable Trust.
Contributions are legally limited, however there are no limitations on conversion from a 401K or other pension plan to an IRA.
If you were an executive of corporate America, upon retirement you most likely converted your 401K plan, or your Profit sharing Plan, or your Defined Benefit Plan to an IRA.
If you have a highly appreciated IRA and you have an estate tax problem, here's what happens if you die with a $3million dollar IRA.
If you have an estate tax problem and you die without a good rescue plan, the Federal and State taxes will be up to seventy-five percent of your inheritance or $2,251,800 in total taxes.
In other words, your heirs will inherit as little as twenty-five percent or $748,200.
Stretch IRA Problems Most advisors cure this problem with the Stretch IRA.
In other words, Stretching the IRA distributions over a longer life other than the owner, usually someone younger, i.
e.
Grandchild.
Stretch IRAs are a good idea for someone who does not have an estate tax problem.
They are a bad choice for those who have an estate tax liability.
Why does it not work in these situations? Because when this Stretch IRA passes to a younger heir estate taxes are due.
If the younger heir receives a $3 million dollar IRA there would be a $1,500,000 estate tax due.
Where is the young heir going to get $1,500,000 to pay the IRS? The presumption is that the heir will take the $1,500,000 out of the account.
When the heir takes out $1,500,000 from this account then it's taxable income and income taxes are due on that money.
This creates a vicious cycle that can be avoided with a good rescue strategy.
You can choose a better way to avoid the 77% estate and inherited tax problems.
Disclosure: The exact calculation of income taxes due are complex, and are dependent on your income tax bracket, the composition of your income, and your applicable state taxes where your assets are domiciled.
If you have estate tax problems, and you have sizable IRA assets, you can almost guarantee double taxation on your death.
You should call a professional who handles such matters for an in-depth analysis of your personal or family's situation.
This statement is required by IRS regulations (31 CFR Part 10, §10.
35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.
S.
Federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
