One of the most overlooked and unplanned areas is Legacy Tax Planning. Most people believe that as the Federal Estate Tax increases they will be ok. Many are correct and their estates are exempt from Estate Taxes currently exceeding 11 million per person, while a couple can double that amount.
However, being exempt from estate taxes does mean that no other taxes are due. Federal and state income taxes must be collected and depending on the beneficiary’s bracket, half or more can be lost to taxes.
A simple example: you have one dollar or more in any type of retirement plan, IRA, 401(k), and the likes, then income taxes are due. Even on that sole dollar, there is no escaping federal and state income tax bite.
It is very important that you understand the difference between the tax rates. Careful attention and plans must be in place when leaving retirement accounts to non-spouse beneficiaries. The recent legislation under the secure act makes this even more concerning. If you have any questions, reach out by email and we will try to answer as quickly as possible.