Can I shield my IRA funds from estate tax?

Question

I am 75 years old and I am concerned that when I die my estate will have to pay income and estate taxes on my IRA. If I put my IRA into an annuity and receive annual payments, will that remove the IRA from my taxable estate?

Answer

There is no way to get your IRA out of your estate except by taking the assets out of the IRA, paying income tax, and giving the money away before you die.

Your IRA is subject to estate tax when you die and your beneficiaries will have to pay income tax as the assets are distributed from the IRA.

But there is also an offsetting deduction for the estate tax that the beneficiaries can take on their personal returns. The estate tax and the offsetting deduction would not quite be a wash, but your beneficiaries would not be hit with a double tax, either.

Talk to a Lawyer

Need a lawyer? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
FEATURED LISTINGS FROM NOLO
Swipe to view more
NEED PROFESSIONAL HELP ?

Talk to an Estate Planning attorney.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you