Retirement and Estate Planning: Tax Codes Kinder to Married Couples

Couple holding handsAlthough some couples remain unmarried to protect their estates, that strategy backfires if you end up paying estate taxes. If you choose not to marry, you and your partner need to educate yourselves on your estate planning and retirement options.

If you’re married, you’re able to inherit an unlimited amount of assets from your spouse—without paying any state or federal estate taxes. In addition, you’re permitted to give an unlimited amount of assets to your spouse while you’re alive without filing a gift-tax return.

This exemption doesn’t extend to unmarried couples. Estates of up to $5.43 million are exempt from federal estate taxes. Some states, however, have lower thresholds for their estate or inheritance taxes.

A recent article in Kiplinger’s Personal Finance, titled Retirement: Estate planning for unmarried couples,” explains that the tax code is also kinder to married couples as far as inherited IRAs. A spouse who inherits an IRA is allowed to roll the account into his or her own IRA, and a surviving spouse can delay taking required minimum distributions until age 70½. As he or she waits to take the Required Minimum Distribution (RMD), the account will continue to grow tax-deferred. A spouses can also roll an inherited Roth IRA into their own Roth, and they’re not required to take RMDs.

Not so for unmarried partners.

An unmarried partner who is named as an IRA beneficiary can roll the account into an inherited IRA and take distributions based on his or her life expectancy.

Questions about estate taxes can be answered thoroughly by an experienced estate planning attorney. Talk to him or her to devise the best strategy for your specific situation.

For additional information on estate planning and retirement investment planning in Houston, please click here to visit my website.

Reference: Kiplinger’s Personal Finance (April 12, 2015) Retirement: Estate planning for unmarried couples”


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