The Tax Risk of Inheriting IRA Assets

The greatest wealth transfer in history will continue to unfold over the next 25 years, as Boomer households pass assets to their children and grandchildren.1

The tax risk of inheriting IRA assets Boomers should think twice about passing on IRA or other qualified plan assets to the next generation, because tax laws changed with the SECURE Act. The stretch IRA is a thing of the past, and the tax consequences of inheriting these assets can be significant.

Planning To Pass On Your IRA Assets?

Consider a different option.

Before the SECURE Act, adult children and non-spouse heirs could inherit an IRA or other retirement plan assets, and minimize their tax exposure by stretching withdrawals from these accounts over their lifetime. Now, most non-spouse heirs who’ve inherited these retirement plan assets after January 1, 2020, must liquidate the account by the end of the tenth year after the passing of the account owner.

Inheriting an IRA can have significant financial consequences

Depending on your beneficiary’s income and the size of your IRA or what you’ve saved in your employer’s retirement plan, inheriting these assets could create a tax burden for your loved one, potentially:

• Increasing their income tax and capital gains tax exposure

• Moving them to a higher tax bracket

• Raising their modified adjusted gross income, with potential adverse effects on retirement planning

What you can do now

If you’re thinking about creating a legacy for your children or loved ones, consider life

insurance. Let’s discuss how you can potentially leverage IRA assets to accomplish your

goals and seek to increase your legacy in conjunction with guidance from your tax and

estate planning team.

Contact us today......

A tax-smart approach to wealth transfer Retirees who have sufficient income, and intend for their heirs to inherit their IRAs and other qualified assets, should consult with their tax and estate planning team.

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