Inheritance taxes
After you die, the death beneficiary can use his or her actual life expectancy to calculate the MDR. inheritance taxes Property tax information. In the first year that you take your MDR, you must make an irrevocable election whether or not to recalculate life expectancy. Not recalculating means life expectancy is fixed in the first MDR year; recalculating allows you to extend life expectancy as you live longer. The advantage of recalculating is that you will never withdraw all of your funds, and never run out of money (the amount may be small). inheritance taxes 2002 tax forms. As long as you live, it reduces your MDR. The disadvantage is that when you die, life expectancy drops to zero, and the balance of your IRA must be withdrawn and subjected to income tax. If you die early, the IRA gets hit hard by income tax, and deferral ends. inheritance taxes Income tax software. You also pay estate tax on the IRA. However, both taxes can be postponed if you are survived by your spouse, and your spouse has been named as death beneficiary. (If you elect not to recalculate, you protect against early death, but spouse can still rollover. )Your spouse is the only person permitted to "rollover" your IRA or pension death benefit, turning it into your spouse''s own IRA. The rollover allows spouse to name a new death beneficiary (or beneficiaries), perhaps your children. This stretches out life expectancy further, reducing MDR, and extending tax deferral. Also, no estate tax is due until spouse dies, because of the marital deduction. Federal estate taxes will be due on your IRA at your death, or if your spouse rolls over, at your spouse''s death. If the death beneficiary (your child or children usually) must withdraw from the IRA to pay estate taxes, that will generate income tax, requiring more withdrawal, generating more income tax. (Combined federal income and estate taxes can be as high as 73%. ) But if estate taxes can be paid from other funds, your child may now take the IRA over his or her life expectancy, which will typically be another 25 years. If you assume that the IRA will earn 6% on average, it will actually grow until the child''s life expectancy falls to 16 years or less, producing an MDR over 6%. If you die before the IRA is in pay status--age 70= or actual retirement--it must be withdrawn within five years or over the life expectancy of your death beneficiary.
Inheritance taxes
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