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Retired NYC teacher IRA - take large withdrawls to lower estate tax?
My mom's IRA is about 800K which puts her into the 37% tax rate if she leaves it to the 2 children. Should she take a large chunk now (say 300K) and pay lower taxes on that and then the heirs pay less on less inheritance? Or will it be 400K each that are taxed?
She doesn't need the money to live on and she's in her 80's. Thinking of tax purposes only.
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The IRS exempts estates of less than $11.4 million from the tax in 2019 and $11.58 million in 2020, so few people actually end up paying it.
She would do well to consult an estate planner.
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OK, so are you saying that because of the lifetime exemtion (or exclusion or whatever it's called), the $800K standard IRA will pass to the heirs as distributions without the heirs paying income taxes on their personal 1040 even though it was growing pre-tax?
Thanks!
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You only get to pay tax on the withdrawals that you take which you have to do over a period of 10 years. There is no immediate tax due upon inheriting the IRA.