You have helped me before and I hope you can help me now. Early this year, my great-aunt left and I intend to inherit. The heritage is in two parts:
I am somewhat confused about the tax implications of my legacy. My first question is about IRAs. I know the rules changed a few years ago; therefore, I would like to know what my options are. I was considering taking money, which is about $ 85,000, and would use it to pay off the mortgage. Do you think this is a good strategy?
As for Ford’s stock, I intend to sell the stock as soon as I receive it. Should I pay sales tax?
You are right that tax laws have recently changed regarding the inheritance of IRAs. A security law was passed in the year that affected the tax rules for inherited IRAs. Under this new legislation, you will usually have to liquidate your IRA account within a 10-year period. This precluded rules requiring a minimum breakdown from year to year. As long as the IRA is liquidated within 10 years, any amount can be distributed at any time.
When payments are made from a traditional IRA, the person receiving the payments is taxed on that money as ordinary income. So if you closed the IRA and took a flat-rate distribution, you would be taxing $ 85,000. This can lead you to a higher tax system and disqualify you for certain deductions and credits due to your higher income. Therefore, in most situations, it would not be advisable to spread the lump sum over one year.
In general, I recommend that payouts be based on your individual tax situation. In other words, take out enough each year to keep you in tax brackets.
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Like any other tax law, there are exceptions. The main exceptions affect the following beneficiaries: the spouse of an IRA holder, an individual who is not less than 10 years old than the IRA holder, a minor child of the IRA holder, a disabled person and a chronically ill person. These beneficiaries can either follow the ten-year rule or use the rules on the distribution of life before the safe law. Unfortunately, the exceptions provided by law do not apply in this case.
There are potentially some taxes on the sale of Ford shares. The cost of your share is based on the fair market value of that share at the date of death. So if you sell a share at a price of $ 14 per share and the value at the date of death was $ 13 per share, you would pay $ 1 per share in tax. The sale of shares is subject to capital gains tax and any capital gain or even loss on the sale of inherited shares is always considered long-term. Therefore, you will be taxed at a favorable long-term capital gain rate.
It is important to remember that if you inherit non-IRA shares, there is no inheritance tax. Your only tax consequences are selling the stock.
When you inherit an IRA, it is important to develop a marketing strategy. This results in lower taxes, and I think the money you save looks better in your pocket than elsewhere.
Rick Bloom is a paid financial advisor only. His website is www.bloomadvisors.com. If you would like Bloom to answer your questions, please email email@example.com.