November 18, 2020

Do you have a goal of keeping current family money in the family when you pass away? There are several different steps to accomplish in this, each of which can be discussed with an estate planning attorney. 

A person who has a current 401(k) or IRA account could accidentally leave behind not just the assets inside the account but a significant tax bill. There’s an income tax liability, for example, that comes with children inheriting that IRA.

This is because regular income tax has to be paid on distributions from all traditional retirement accounts in the United States. In the past, your heirs had the opportunity to stretch distributions received from this fund over the course of several years to reduce their overall tax burden.

However, the account now must be liquidated within ten years after the death of the primary owner of the account. You might need to think about whether or not converting traditional accounts to Roth accounts, which have tax free distributions, makes the most sense for your family.

For more information about this and to decide what other assets need to be involved in your comprehensive estate plan, it is best to sit down with an estate planning attorney and to create a comprehensive inventory of all of the assets and debt associated with your name. This can help you begin to answer some of the most important and difficult questions around the estate planning process.