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Fldavem1
Level 2

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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Accepted Solutions
Bsch4477
Level 15

Retired NYC teacher IRA - take large withdrawls to lower estate tax?

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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3 Replies
Bsch4477
Level 15

Retired NYC teacher IRA - take large withdrawls to lower estate tax?

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. 

View solution in original post

Fldavem1
Level 2

Retired NYC teacher IRA - take large withdrawls to lower estate tax?

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!

Bsch4477
Level 15

Retired NYC teacher IRA - take large withdrawls to lower estate tax?

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. 

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