You may be tired of hearing me harp on taxes. Now some mainstream news sources are starting to chime in. This is a 4th of July article from Kiplinger. I am going to quote the very first sentence of the article.
“Traditional IRAs are set up in a way that basically incentivizes you (and your heirs)
into paying the highest tax bill possible. Don’t fall for it.”
They’re right.
Generally based on the current tax brackets and rules the effective tax rate many Americans pay while they are alive is less than 20 percent.
IF they wait until they die (and many will, due to bad advice or indecision), their heirs are offered a choice. They can receive the money over a 10-year period to minimize the income tax, or the heirs could take the money in a lump sum with no regard for taxes (worst case!).
We find overwhelmingly that heirs lean to taking the lump sum. That is what the government is counting on, Then the heirs pay 30, 40 or even 50 percent to inherit taxable money.
I wish we could get this understanding to more. If paying the income taxes while alive reduces the taxes by 10, 20 or even 30 percent, that means that the $30 trillion about to be inherited by the next generation will put $3 to $9 trillion of inheritance in the hands of Americans rather than the government.
Doesn’t it make sense that your heirs and beneficiaries aren’t left with this difficult choice?
If you’re unable to retrieve this article, let us know and we’ll send you a copy.
