You helped me in the past, and I hope you can help me now. Earlier this year my grandfather died and I am going to inherit. Pay with two components:
I’m a little confused about what my property tax means. My first question deals with the IRA. I know the rules have changed in the last few years; therefore, I would like to know what my options are. I was thinking of taking some money, about $ 85,000 and using it to pay off my mortgage. Do you think that is a good idea?
As for Ford’s stock, I plan to sell the stock as soon as I get it. Will I have to pay tax on sales?
Thank you, Ted
You are right that tax laws have recently changed regarding when you inherit an IRA. In 2019, the Safe Harbor Act was passed, which affected tax laws regarding inherited IRAs. Under the new law, you are generally required to terminate an IRA account within 10 years. This abolished laws requiring limited grants each year. As long as the IRA is abolished within 10 years, the allocation of any money can be taken at any time.
When the allocation is made to a traditional IRA, the recipient is taxed the amount as normal tax. So, if you closed the IRA and took a lot of money, you would be taxed at $ 85,000. This can result in you being placed in a higher tax fund and may be eligible for certain discounts and bills due to higher income. So, in most cases, I would not recommend taking the allocation amount in one year.
I generally recommend taking grants according to your tax status. In other words, take only enough money each year to keep you in the same tax system.
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As with any tax law, there are exceptions. The main choice affects the following beneficiaries: spouse of the IRA owner, a person under 10 years older than the owner of the IRA, the minor child of the IRA owner, the disabled and chronically ill . These heirs can comply with the 10-year law or take advantage of the life-allocation rules that were in force before the Secure Act. Unfortunately, in some cases, exceptions to the rule do not apply.
In the case of a Ford stock sale, you may have to pay taxes. Your stock cost is the fair market value of that stock from the date of death. So, if you sell the stock for $ 14 on average and on the day of death the value was $ 13 as a share, then you will pay tax on $ 1 as a share. The sale of stock is subject to income tax and any profit or loss as a result of the sale of inherited stock, is generally regarded as long-term. Therefore, you will be taxed at a good rate of long-term profit.
It is important to remember that if you accept another IRA as an inheritance, there is no tax on the inherited value. Your tax returns are when you sell stock.
If you inherit an IRA, it is important to develop a distribution plan. This will result in lower taxes, and in my opinion, the money you save looks better in your pocket than anywhere else.
Rick Bloom is just a financial advisor. His website is www.bloomadvisors.com. If you would like Bloom to answer your questions, email rick@bloomadvisors.com.
