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Taxes for Heirs

Taxes don’t stop at your passing. Some — like estate tax and even income tax — are actually triggered when you die. Under the current tax code, estate tax only comes into play if you have more than $11.4 million in assets, so it doesn’t apply for most of us.

But income tax is dependent upon the type of account that is inherited and whether beneficiaries have been named. Many retirees believe that their estate planning is done because they have a will. But that’s not necessarily true. Beneficiary forms for IRA and 401(k) accounts take precedence over a will. In 2009 there was a Supreme Court case where a deceased man’s daughter argued that she, not his long-divorced wife, should get his retirement plan dollars. The ex-wife even waived her claim to the funds during the divorce. But the court ruled unanimously that, because the beneficiary form was never changed to remove her as sole beneficiary, she got it all. Beneficiary forms are filled with landmines; one wrong move or one missing contingent beneficiary can trigger unnecessary taxes.

Even if you have all of your forms filled out correctly, your family can accidentally blow it when they complete the paperwork to inherit your retirement account. By choosing the wrong payout option, they can accidentally create huge tax liabilities for themselves, and there are no do-overs! The IRS will not let them “un-ring the bell”. The tax has to be paid, sending more of your hard-earned savings to the IRS instead of to your family. Marsh Wealth Management can help you educate your family members ahead of time, so they are prepared with a plan.

to help you with legacy and estate

Legal & Estate Planning

At Marsh Wealth Management, we work with well-established estate planning attorneys to ensure that your assets are titled properly to avoid probate and ensure your legacy will be tax-efficiently distributed to your loved ones. With your permission, we can communicate directly with your attorney, making sure that your wills, financial powers of attorney, and medical powers of attorney are safely in place.

  • We review your IRA and 401(k) beneficiaries to make sure they match the intent of your will.

  • We review your beneficiary designations and legacy goals from a tax and probate perspective.

  • We coordinate with your estate attorney if updated legal documents are advised.

  • We create plans to minimize the tax burdens on your heirs.

​Do you have a burning question about retirement planning? Send it to us, and we’ll answer it for free.

Schedule a no-obligation consultation (in person, by phone, or over Zoom). Contact us now.

Want to ensure your financial legacy?

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