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Latest from Our Financial Insight Blog

Estate Taxes and IRA Taxes are Two Separate Things

I just got off the phone with a client I've known for many years. His wife passed away last year and he wanted to discuss the beneficiaries on his accounts. He assured me that he didn't have enough money in his IRA to worry about estate taxes. I said, "Wait, go slow on that. You don't want to confuse estate taxes and taxes on IRA's. It's a different subject."

Currently, and with the new tax code, the estate tax exemption is 11.2 million for an individual and 22.4 million per couple(Not somehting most people have to worry about). However, if one passes on an IRA of any amount to a beneficiary other than their spouse, usually the whole amount will be taxed as regular income the year it is inherited. This is commonly overlooked and can lead to a huge tax bill for the beneficiary. Of course, there is a way to pass, even an IRA to a beneficiary without them having to pay taxes.

Happy New Year

16 Reasons why accountants like Indexed Universal Life better then Mutual Funds

Let's just take a look at reasons 3 and 4...

By Allen Koreis

3. There are no limitations on the amount that may be contributed annually to an IUL. As of the date of this article, the IRS limits the annual contribution to an IRA to $5,000 annually if the account owner is under the age of 50 and $6,000 annually if the participant’s age is 50 or higher. 

4. Policy owners may access their money from an IUL without IRS penalty regardless of age. Qualified plan withdrawals prior to age 59 1/2 are subject to a 10 percent penalty in addition to being taxed as ordinary income for the year the withdrawal is take. 

Commonly, people find themselves in a situation where they need to access their savings. When this means tapping into a qualified plan, the available amount of the account value is typically reduced by 30 percent (10 percent and 20 percent withholding). Then when the tax return is filed for the year in which the withdrawal was taken, additional taxes may be due if the qualified plan owner is in a tax bracket greater than 20 percent. With indexed universal life insurance, the available account value may be accessed at any time for any reason without tax or penalty via policy loans which are not required to be repaid.

You can see the rest of the article here

Turn Your taxable IRA into a Tax-Free Benefit for Anyone

The IRS is looking forward to taking their portion of your IRA. Even if you plan on using your IRA as little as possible. At age 70.5 all owners of IRA’s have to withdraw what is known as their “Required Minimum Distribution”. If you die and gift your IRA to a spouse, the IRS will continue to tax your money, and if you don’t have a spouse to bequeath it to, the IRS likes that even more. They’ll tax the whole amount all at once as regular income. In a situation like the latter, your IRA will be worth only abut 65% of it’s original value upon your death.