Tags: Retirement | retirement | estate taxes

5 Things to Know About Retirement and Estate Taxes

By    |   Saturday, 13 June 2015 05:56 PM

Retirement and estate taxes are complicated, with new rules affecting estate planning all the time. Navigating them successfully can make the difference between protecting assets and losing them.

Here are five things to know about retirement and estate taxes.

Free Retirement Calculator: When Can You Retire? — Click Here to Find Out

1. Taxes Upon Death
When someone dies, their retirement account may not be free from large tax burdens. According to some estimates, a beneficiary could ultimately receive proceeds from an estate that have been taxed by as much are 70 percent or more after that tax bill has been paid.

Retirements accounts such as IRAs are taxable as income upon the death of their owners. Those IRAs that are very large may also incur estate taxes as well as federal and state transfer taxes, creating a scenario where a beneficiary could lose hundreds of thousands of dollars.

2. Surviving Spouses
Surviving spouses have options that affect taxes. If a surviving spouse is the beneficiary of that estate's IRA or 401(k), he or she can take the deceased's investment account and make it their own, according to Debt.org. The spouse may also elect to roll that account over into their own retirement savings, in some instances. Distributions to the surviving spouse would not begin until that person turned 70.5 years old. Income taxes would be deferred.

3. Other Beneficiaries
If a beneficiary to a retirement account is not a spouse, the recipient can cash out and pay taxes or treat it like the IRA was inherited. That route requires distributions to be paid out after Dec. 31 the year after the death occurred, Debt.org noted.

How Soon Can You Retire? Free Test Shows You When — Click Here

4. State Taxes Vary
Some states are better than others for retirees. Understanding IRS laws related to these accounts is crucial. And state taxes for retirees can vary, according to Kiplinger, which creates maps of the most and least-friendly states for retirees.

Among the most-friendly are Florida, Mississippi, Louisiana, Arizona, Nevada and Alaska. Those making the least-friendly list are New York, California, Connecticut, Vermont, New Jersey and Oregon, Kiplinger noted.

5. Living Trusts
According to About Money, if you elect to create a living trust, understand that not all  accept retirement accounts as trust assets.

Proper language in that trust is crucial. "If you are considering naming your trust as the beneficiary of your qualified retirement plans, then it must contain specific language that gives your successor trustee the flexibility needed to make appropriate tax elections and to allow required minimum distributions to be stretched out over the lifetimes of your beneficiaries," the website said.

An Extremely Simple Way to Determine If You're Ready to Retire — Find Out Now

Related Stories:

© 2019 Newsmax. All rights reserved.

   
1Like our page
2Share
Money-Wire
Retirement and estate taxes are complicated, with new rules affecting estate planning all the time. Navigating them successfully can make the difference between protecting assets and losing them.
retirement, estate taxes
486
2015-56-13
Saturday, 13 June 2015 05:56 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved