In this Elder Law Minute, Wes Coulson discusses how to deal with IRAs when a first spouse dies.
Transcript:
As you may know, at the end of 2019, Congress passed and the president signed into law, a law called the SECURE act, and basically what it does, is it ends stretch IRAs in favor of a requirement that if somebody inherits an IRA other than a spouse and a special needs person, they have to pull all that money out within 10 years.
People think of that in terms of the next generation, but there’s also something really important there, and actually was even before with a married couple who have a significant amount of IRAs. Important bit of advice is that in the year in which the first spouse dies, you should sit down and talk with your tax professional to see whether the surviving spouse should be taking a large IRA distribution in that year.
Why would you want to do that? Well, because if you look at the tax brackets and exemptions, they’re twice as big until you get in the way high tax brackets for a married couple, as they are for a single taxpayer, and likewise the exemption is twice as big for a married couple. So basically, the year in which somebody dies, you can still file that married tax return and it’s your last best chance to pull money out of the IRA at a rate that’s probably lower than those same distributions in later years, and in most cases, it’s going to be a lower rate if you’re retired and on a fixed income than your children or other beneficiaries are going to have to pay on those IRAs after they inherit them.
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