Don’t Leave Your IRA to the IRS – EDWARD JONES

Written by on September 27th, 2023


You can get retirement income from your IRA — but what if you don’t use it all? If you leave the remainder to your grown children, could they face taxes?

It’s possible. Until a few years ago, beneficiaries could stretch out the mandatory withdrawals from an IRA over their lifetimes, resulting in smaller annual tax bills. But new legislation changed this lifetime limit, so some beneficiaries may now have to take taxable withdrawals each year for a decade following the passing of the IRA’s account owner.

Not all beneficiaries are subject to the new rules. But to help protect those who are, you may want to consider a couple of moves.

For example, you could use a permanent life insurance policy to provide your children with enough funds to possibly offset the IRA taxes. And if you leave assets from a taxable account, such as stocks and bonds, your beneficiaries could sell them immediately, avoiding capital gains taxes, and use the proceeds to help with taxes from the IRA.

In any case, consult with your tax advisor before making any moves related to an inherited IRA. And the sooner you start planning, the better.

This content was provided by Edward Jones for use by your local Edward Jones Financial Advisor, Casey Caliva, at Historical 30th & Fern. 

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