Opinion: I have questions about inheritance tax and other inheritance issues
I have regularly received questions about inheritance, and they have relatively simple answers. Keep in mind that I am not a lawyer and you should always consult a qualified lawyer for legal advice, but here are some frequently asked questions (and their answers) on common estate issues.
Q .: How much can a person leave to children without estate tax? My friend says if I gave them money while I was alive, maybe I should pay the tax.
A.: If you made a donation subject to gift tax and elected to use part of your lifetime gift tax exclusion, the amount subject to gift tax reduces the amount that you can leave on death without inheritance tax. So your friend may be right, but the inheritance and gift tax exemption I’m referring to applies to $ 11.4 million in 2019. Married couples who plan well have $ 22.8 million dollars to work with. These amounts could be reduced in future legislation but for now they are indexed to inflation. As a result, most people will not have estates subject to inheritance tax even if they reduce their exemption by donating substantial amounts over their lifetime.
Q .: I have an IRA with my wife as the “primary beneficiary” and a co-owned cash account. Our will states that if one dies, the other gets everything. When I die, what steps must she take to secure these accounts in her name? I guess she just needs to provide a death certificate. Is it correct?
A.: Usually, a death certificate and a form or two are sufficient. The will does not affect the accounts you listed. As a joint account, the cash account becomes his automatically upon your death. Since she is named the primary beneficiary of the IRA, she will have all the rights of a beneficiary spouse, including the ability to transfer it to her own IRA. The will generally only applies to assets titled only in your name as an individual with no designation of beneficiary.
Q .: When I received my broker statement from my inherited non-spouse Roth IRA, I was surprised at the RMD number. The inherited Roth without a spouse is based on a single life table and represents just 13.4 years over half of the life expectancy on my RMD from my regular IRA. Why?
A.: IRAs inherited from a non-spouse use a single life expectancy scale to calculate the minimum required distributions. Your personal IRA scale uses a joint life expectancy. My understanding of the rationale for using a single life table for Inherited IRAs without a Spouse and Roth Inherited IRAs is to do exactly what you see. The shorter scale forces funds out of the tax account at a faster rate.
Q .: If something happens to me, can I reissue this legacy Roth IRA? What are the new conditions for the new beneficiary? Or, what becomes of it?
A.: Yes, you can send the account to whomever you want by correctly naming them as your beneficiaries. When they inherit, they should continue to use the exact same RMD calendar that you used on the legacy account.
Q .: I lost my husband a month ago and my in-laws name is on his beneficiary. As a spouse, will I be entitled to something for myself and my children?
A.: I am sorry for your loss. You may be entitled to some funds, but you should see a good lawyer and quickly.
Normally, a beneficiary designation on an account indicates who inherits the assets and replaces any will or trust that may direct the inheritance of other assets. However, many states have âelective shareâ statutes that give surviving spouses a certain percentage of the assets of their deceased spouse. This document gives a brief overview of these laws. These laws vary widely with respect to the amount a widow can get, the type of property eligible to elect, and the filing deadline.
I suggest you call a lawyer quickly as there have been a number of instances where a widow has filed an asset claim but the assets have already been distributed to named beneficiaries and spent making it difficult to collect. from the widow.
If you have a question for Dan, please email him with “MarketWatch Q&A” in the subject line.
that of Dan Moisand comments are for informational purposes only and do not replace personalized advice. Consult your advisor to find out what is best for you. Some questions are edited for brevity.