If you are expecting an inheritance, the IRS may be putting a damper on what will happen to it. Basically it appears that you have to take Required Minimum Distributions (RMDs) from the inherited IRA if the original owner was required to take them before they passed away.

The former “stretch IRA” was modified when the SECURE ACT was voted into law. Now you have 10 years to drain the retirement account. The proposed rule the IRS is proposing that you have to take out RMDs equivalent to what the original account owner would have taken if they were alive.

Sean Moran is a financial advisor specializing in retirement planning, college planning, life insurance, disability insurance, Long Term Care insurance and a holistic approach to your personal finances.

Sean has clients in NJ, TN, VA, TX and would love to help you either locally or virtually.

Sean is an author, former corporate tax professional and entrepreneur. He holds a BS from York College of PA and a Masters of Taxation from Fairleigh Dickinson University.

If you are interested in learning more, you can contact Sean at: smoran@redbarnfinancial.com or schedule a meeting here: calendly.com/spmoran Red Barn Financial LLC offers securities through Ad Deum Funds, a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitationfor the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance….(read more)

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Inheriting money can be both a blessing and a burden. On one hand, receiving a windfall can provide financial security and stability for the future. On the other hand, the tax implications of inheriting money can sometimes be confusing and overwhelming. And now, a recent IRS proposal could make it even more complicated for individuals who inherit large sums of money.

The IRS is considering changing the rules around how inherited assets are valued for tax purposes. Under the current law, when assets are passed down to heirs, their tax basis is “stepped up” to their current market value at the time of the original owner’s death. This means that if an heir sells the inherited asset, they only pay capital gains taxes on any appreciation in value from the time they received it. This can result in significant tax savings for heirs.

However, the IRS is proposing to eliminate this step-up in basis rule for certain assets, specifically those that have not been subject to estate tax. This means that heirs would have to pay capital gains taxes on the full appreciation in value of these assets, not just the increase in value since they inherited them. This could result in a substantial tax bill for individuals who inherit valuable assets such as real estate or stocks.

This proposal has raised concerns among estate planners and wealth advisors, who argue that it would create unnecessary complexity and burden for heirs. It could also disincentivize individuals from passing down assets to their loved ones, as they may be concerned about the tax implications. In addition, the proposal could disproportionately impact middle-class families who may not have the resources to navigate the tax complexities.

If this proposal is implemented, heirs who inherit valuable assets without a step-up in basis could face significant tax liabilities. It is important for individuals who are planning their estate or expecting to inherit assets to stay informed about these potential changes and consult with a financial advisor or tax professional to navigate the implications.

Inheriting money can be a complex and emotional process, and adding additional tax burdens can make it even more challenging. It is important for individuals to be aware of potential changes in tax laws and plan accordingly to ensure that their loved ones are not unduly burdened by unexpected tax liabilities. Stay informed and seek professional advice to navigate the complexities of inheriting money in the current tax landscape.