<p>There are some other interesting proposals, like requiring non-spouse IRA beneficiaries to take a full distribution over 5 years instead of the beneficiary’s lifetime, increasing the estate tax, changing S-corp taxation, and putting limits on how much can be accumulated in tax-preferred accounts,</p>
<p>This last will require all trustees such as your brokerage to report to the IRS the value of your accounts every year, which means the govt will now know where and how much you have in retirement assets. First step in “nationalizing” the private retirement system, leading to confiscation of accounts? Cyprus anyone? ;)</p>
<p>Oh, and repeal of the Telephone Excise Tax, which was first enacted in 1898 to pay for the Spanish-American War. :)</p>
<p>The difference can be staggering. If the difference is significant, the only person that i can think would take lump sum would be someone who has a terminal illness and and doesn’t have a surviving spouse or that option.</p>
<p>@mom2collegekids, or perhaps someone who would rather roll the lump sum into an IRA and manage it for their heirs (i.e., they really don’t need the money, and it is intended to be passed on to heirs). Everyone’s situation can be very different. </p>
<p>The FATCA regulation does not make any change in the tax information you have to file. It is all between the banks and the IRS (unless a country has signed an IGA – intergovernmental agreement – with the IRS, in which case a foreign bank provides pretty much the same info to their own government, who in turn provides some info to the IRS). </p>
<p>Yes, if that lump sum is substantial. In H’s case, the lump sum was a joke compared to the value of his pension if he or I live another 20-30 years.</p>
<p>I was just reading that if you have much of your 401k in company stock you can save quite a bit in taxes if you take a lump sum. Lots of fine print but interesting . </p>
<p>@sax, true enough, but unless the company was holding a gun to my head (and some do), I would not have company stock in my 401k. 180 degrees removed from the goal of diversification. </p>
<p>How do you folks deal with tax-advantaged instruments in your estate planning? We have 401(k)'s. If we died suddenly, the kids would inherit but would have to pay all the deferred taxes, right? Is there a legal/moral way to miniseries the tax?</p>
<p>As I understand it, inherited IRA’s and 401Ks are simply divided among the heirs by the IRA/401k custodian. You don’t owe any gains taxes simply because of death. Then, when the inherited IRA has been transferred to the heirs, the heir has a new “required minimum distribution” schedule, that generally requires him to begin taking distributions right away, based on his remaining life expectancy. Generally these are a great deal lower than what the deceased would have been required to take since the heir may be a lot younger. </p>
<p>There are some “angles” to this regarding the heirs rolling the accounts into one of their own, but I can’t remember the issue associated with that.</p>
<p>As far as estate taxes go, you don’t owe any unless you’ve been evil enough to accumulate more than 5.25 million to leave. Your IRA/401K gets counted in the total value of your estate. If you happen to be in that situation, usually your assets outside your 401k would be adequate to fund the estate tax payment, prior to distributing the remaining balances to your creditors and heirs. </p>
<p>PS: Most accounts have a designated beneficiar(ies). Make sure this is consistent with your will. If you will divides the account a certain way, the beneficiary designation either has to be the same, or it has to name your estate as the beneficiary. Otherwise the 401k trustee is bound by your beneficiary designation on the account, and not your will, I believe. </p>
<p>@dadx, that’s true for Federal. I currently reside in NJ, and If you’re a New Jersey resident and leave assets with a gross value of more than $675,000, the executor of your estate will have to file a New Jersey estate tax return.</p>
<p>PS. I am planning to not be a NJ resident when I die. </p>
<p>IxnayBob, NJ has a low threshold. Since you plan to die elsewhere, just to be on the safe side maybe you should put a sign on your car bumper that reads “don’t hit me - I haven’t finished setting up the trust yet”. </p>