With the estate tax exemption at $11.4 million for individuals and twice that for married couples, the Tax Policy Center estimated that fewer than 2,000 estates in 2018 did not receive this exemption. This change means that the concern for affluent families in Georgia has shifted to other tax-related estate issues. In particular, the SECURE Act means there are a number of different strategies that should be considered for 2020.
Non-spouse IRA beneficiaries must take the distribution over 10 years instead of a lifetime, which could potentially incur significantly more taxes for a child. A solution might be to make both the spouse and child primary beneficiaries. The child would then inherit the surviving spouse’s part of the IRA when that parent died, making for two separate 10-year distribution periods instead of one.
Charitable trusts can be a way to generate income while avoiding capital gains taxes on appreciated investments. The SECURE Act has also delayed the start of required minimum distributions, changing it from 70½ to 72. A Roth IRA conversion can help take advantage of this time of lower taxes. Finally, while making a trust an IRA beneficiary was once considered a good financial decision, this has become more complex. People for whom these issues are relevant may want to discuss best practices with financial and legal professionals.
Whether these issues affect an individual, trusts may be useful in other ways. For example, someone who has a family member with special needs may want to create a special needs trust, so the individual’s inheritance does not affect access to any government benefits. A trust can also be a way to control how and when distributions are made. For example, they might be tied to milestones, such as graduating from college or reaching a certain age.