Inheritance tax on stretch IRAs
Is there a federal estate inheritance tax owned on a non spousal stretch IRA if the balance is high enough? Is there a way to avoid it if there is?
Is there a federal estate inheritance tax owned on a non spousal stretch IRA if the balance is high enough? Is there a way to avoid it if there is?
Permalink Submitted by Bruce Steiner on Tue, 2008-08-05 23:38
By leaving it to charity.
Permalink Submitted by Alan Spross on Wed, 2008-08-06 00:53
Of course, the unified credit goes to 3.5 million in January, and post 2009 Congress will probably establish the credit at that level or perhaps higher. But any state inheritance taxes would also need to be considered since the state exemptions can be much lower than the current federal exemption of 2 mil.
Could also leave the excess of the credit to charity to avoid estate taxes.
Permalink Submitted by Al Fry on Wed, 2008-08-06 03:22
Do not forget also that IRA income is IRD, so any federal estate taxes attrituable to the pre-tax value of the IRA is deducible by the IRA beneficiary. Its not unusual for CPAs that do not subscribe to Ed’s nesletter to overlook that!
Permalink Submitted by Janine Janine on Wed, 2008-08-06 16:28
What does IRD stand for, please?
Thank you
Permalink Submitted by Bruce Steiner on Wed, 2008-08-06 21:34
The lawyer who prepares the estate tax return should explain to the client or his/her accountant how to claim the deduction.
Permalink Submitted by Alan Spross on Thu, 2008-08-07 00:36
IRD = Income in respect of a Decedent
This is income the deceased had a right to receive but did not during his lifetime. This income is included in the gross estate, but the beneficiaries pay income tax on this income as they receive it. Any federal estate tax paid by the decedent’s estate is allocated to this income and the beneficiary may qualify to deduct their allocation as a misc itemized deduction. See Pub 559 for a thorough explanation.
IRD does not get a basis adjustment upon decedent’s death.