submitted by Richard P. Wilson, Esq.
The usual procedure in estate planning is to have the client submit detailed financial and general family information.
Most of the time you do not need financial information for the family, but at some point, you may have to.
Recently in devising an estate plan, I realized that I needed financial information for the family.
The client has two children: one married, the other single; the married child and her husband are retired and in their sixties.
The son is an active businessman in his fifties and is in a very high income tax bracket being single with no dependents.
The general plan is to divide the estate equally between the children; however, her assets are $3M with $2M in liquid assets and $1M in an IRA.
If the IRA is divided equally by beneficiary’s arrangement, the son is at a disadvantage because of his income tax bracket.
He has to pay income tax at his high rate on any withdrawals from the inherited IRA from his mother, while the daughter and her husband are definitely in a lower bracket.
In order for him to be treated equally, a greater portion of the IRA should pass to the daughter and her husband.
The son will receive an equal amount of the liquid assets.
The point is that if there is a large IRA in the estate, you will need to know what income tax rate is being paid by the beneficiaries.