Retirement is the time when you have to determine your own needs as well as the needs of your heirs. You have to decide the financial accounts you have to leave for your heirs and the ones you need to tap for your own financial needs.
If you are concerned about the inheritance your heirs will receive, the following are some of the most valuable assets for your heirs.
Roth IRA
One of the reasons Roth IRA makes a great asset for heirs is that Roth distributions are tax-free. Proper planning can leave your heirs with substantial distributions from the Roth account over time.
As we write, the federal tax is at $11.58 million for married couples. This implies that most Roth IRA accounts that are inherited will be free from income and estate tax.
Stocks, Bonds, and Mutual Funds
Stocks, bonds, and mutual funds form good assets to leave for the heirs. This is because of the “step up” in cost basis.
Now, if you didn’t know about it, cost basis refers to the price of an asset, let’s say a bond or stock, the time it was initially purchased. This is taken as a reference to measure the increase or decrease in the value.
When you are selling the asset, the capital gain taxes are determined by the increase in price.
IRA or 401(k)
If you want to leave the costliest of the assets for your heirs, the tax-deferred retirement accounts such as IRA or a 401(k) will do the job. They are distributed at ordinary tax rates and get no set up on a cost basis.
Contact an Experienced Estate Planning Attorney
If you want further information or any help regarding what to leave for your heirs, contact us right away. At Keystone Asset Protection and Estate Planning, we would be more than delighted to provide our services so that you can protect your assets and preserve your hard work.