Estate Taxes

Submitted by Mary on Sat, 2018-11-17 15:38

Is the value of an IRA included in the decedent’s estate for the purpose of determining death taxes?

Thank you very much for your valued response.



Submitted by Alan - IRA critic on Sat, 2018-11-17 16:51

Yes, all IRAs including inherited IRAs are included. However, the federal estate exclusion is so high now, this is likely only to be an issue in certain states with a much lower exclusion.

Submitted by Mary on Sat, 2018-11-17 23:51

Thank you for your prompt reply. I am puzzled because when my brother’s wife died (state of MA), the lawyer filed for probate listing all assets and stated that this excluded IRA’s and US Savings Bonds. From this my brother assumes that IRA assets are not included in the value of his estate when he dies.  

Submitted by Mary on Sat, 2018-11-17 23:56

We are concerned because the Massachusetts exclusion is $1 million, and if the estate value is over that the death taxes start back at $1 dollar!

Submitted by Bruce Steiner on Sun, 2018-11-18 02:54

If it’s payable to a named beneficiary, the IRA isn’t a probate asset.  But it’s included in the gross estate for estate tax purposes.

Submitted by Mary on Sun, 2018-11-18 19:23

Thank you very much for the clarification!

Submitted by Michael Gregory on Sat, 2019-12-28 21:15

Dear Master Po,  I have a basic understanding of how the MA estate tax works and have the same basic understanding of how an A/B trust would benefit a married couple in allowing them to use their individual 1M exemption. My question is, what if a person is single, can he or she still establish a trust to take advantage their 1M exemption.  Instead of this single person leaving 1M in trust for a spouse, can they establish a trust for a brother, or a friend and thereby use their 1M exemption. So now if this person was worth 1.9M at death with 1M of the 1.9M going to their trust, this would leave .9M taxable estate in MA. I believe  the result would be no MA estate tax due. Thank you so much for your answer – grasshopper.?

Submitted by Alan - IRA critic on Sat, 2019-12-28 22:15

An A/B or bypass trust is only available to spouses. It is highly unlikely that MA would maintain any exception to this.

Submitted by Bruce Steiner on Sun, 2019-12-29 04:17

  • A and B are archaic terms for the marital and credit shelter (bypass) (family) trusts.  The credit shelter trust is intended to shelter the exempt amount (and the income and growth thereon during the spouse’s lifetime) from being included in the spouse’s estate, while keeping it available for the spouse if he/she ever needs it.
  • If you’re providing for someone other than a spouse (in your example, a brother or friend), the $1 million Massachusetts exempt amount (or the $11.4 million Federal exempt amount) isn’t a limit.  You can leave your entire estate in trust for your sibling or friend so that it won’t be included in that person’s estate.  Of course, you won’t get a marital deduction in your estate, but once you’ve paid the estate tax on your estate, the assets will remain out of your beneficiaries’ estates for a long time.
  • Bruce Steiner

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