Interesting Fact.... (TAX DEFERRED ACCOUNTS)!!!!!

[TexasOaks]

I recently have gone through an estate being passed down to me and my family and learned one thing I didn't realized and I wanted to pass it along:

By holding equities in tax-deferred account, investors lose the potential for a step-up in basis (upon death) for tax purposes. The step-up may totally eliminate capital-gains taxes for the estate.

[rstlne]

I think it is true for 401K and Traditional IRAs but it's different for a Roth IRA, where qualified distributions will still be free of income tax to heirs. (Note: Federal estate tax rules still apply to Roth IRAs.)

Here's the implication: After you retire, you may want to withdraw from your tax-deferred accounts first (except the Roth IRA) for living expenses. That way, your heirs stand to inherit more of your taxable accounts and may enjoy the stepped-up cost basis. Of course, do consult with an estate planner to hash out the details.

[TexasOaks]

Originally Posted by rstlne

I think it is true for 401K and Traditional IRAs but it's different for a Roth IRA, where qualified distributions will still be free of income tax to heirs. (Note: Federal estate tax rules still apply to Roth IRAs.)

Here's the implication: After you retire, you may want to withdraw from your tax-deferred accounts first (except the Roth IRA) for living expenses. That way, your heirs stand to inherit more of your taxable accounts and may enjoy the stepped-up cost basis. Of course, do consult with an estate planner to hash out the details.

Somebody's juices are flowing.

[Xin Lu]

I just tell my parents to spend everything and don't leave me anything. That way I don't have to worry about the basis stuff.

[fred333]

That is what I tell my folks. It is there money live it up.

[rstlne]

Originally Posted by Xin Lu

I just tell my parents to spend everything and don't leave me anything. That way I don't have to worry about the basis stuff.

That's what I tell my parents too. But they don't listen.