Do You Own an Income Tax Time Bomb?

Do you own an income tax time bomb that is likely to explode at your death?

We’re talking, of course, about retirement accounts. In these accounts, you have a huge buildup of money, and you’ve never paid income tax on most, if not all, of it.

Who do you think is going to pay the income tax when you pass away? Whether there’s $50,000 in it or $5 million, more than 90 percent of the time, it’s going to be your kids and grandkids. There’s no exemption for this. It’s not like the estate tax. If you have a dollar in your retirement account, your kids are going to pay income tax on a dollar.

It’s important to understand how the beneficiary form control all that.

For many of you, especially if you’re retirement age, your retirement accounts for you and your spouse, if you’re married, is your largest asset. If not, it’s your second largest behind your house. But for many of you, it’s your largest. Yet that tiny little box is deciding who gets what, and that leads to a lot of potential problems.

It can also lead to opportunities, because if you name a beneficiary directly, the asset will bypass probate and go immediately to the beneficiary. However, depending on how it’s left to them, that income tax bomb can go off if they cash it in all at once. The income tax comes due on their tax return, not yours. Any distribution after the date of death is taxed to the beneficiary.

So there’s critical importance on how we name beneficiaries and coordinating all of that with documents. Everyone thinks I need a will. I need a power of attorney. You do need all of that, but the way you name beneficiaries is a critical component of your estate plan, and in my opinion, is the most overlooked area in estate planning today.

I have created an IRA Beneficiary Checklist that is available on my website, https://broganfinancial.redfernmediadevelopment2023.com.

When you go through it, you’re going to see how complex this is and all the different things you need to be asking yourself and the companies that have your retirement account. I urge you to go check it out.

Click HERE to get your free copy.