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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1375
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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My Dads total assets are $160k in various IRAs and annuities,

Resolved Question:

My Dad's total assets are $160k in various IRAs and annuities, when he withdrawls the MRD each year he pays income taxes (at his rate). I assume that when he dies, his beneficiaries would have to pay income taxes (at their rate) on the $ they inherit from him... which would be about $40k each.

Would gifting provide any tax advantage ?

In otherwords, what would be the tax difference between inheriting $ or receiving a gift. (if any)
Submitted: 2 years ago.
Category: Tax
Expert:  Jax Tax replied 2 years ago.

Jax Tax : Welcome to JA. I am here to address your tax questions.
Customer:

ok do you need more info

Jax Tax :

Annuities and IRAs do not participate in the stepped up basis at death.

Jax Tax :

You cannot gift an IRA.

Jax Tax :

Passing at death is better.

Customer:

But If he withdrawls from the IRA... can he / should he gift that

Customer:

why is it better

Jax Tax :

Since the IRA cannot be gifted, he would have to withdrawal the money being taxed, and then he would have to gift it.

Customer:

ok... so alternative is that he dies, we inherit and pay income taxes on what we inherit - right

Jax Tax :

Assuming when the money is split at death the beneficiaries are in a lower tax bracket then passing it at death is best.

Jax Tax :

The account also continues to grow tax free.

Customer:

ok.. and if beneficiaries are at a higher tax bracket.. then may be better to withdrawl and pay taxes at his lower rate now (not considering the tax free growth)

Jax Tax :

The only reason to cash it out now and gift the funds would be a time value of money valuation.

Customer:

ok thanks !

Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1375
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Jax Tax and 4 other Tax Specialists are ready to help you

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