How Should I Incorporate Tax Deferred Assets into My Gifting Plan?

In Michigan, you have many things to think about when you first approach your estate plan. You want a plan that will help you enter retirement so that you can not just survive, but thrive financially. You want to know that you’ve taken proactive measures to guard against risks like the cost of long term care. Finally, you also want to know that your loved ones are taken care of. This process starts with evaluating all your assets and your goals to determine how you can align your estate plan with these intentions.

If you want to make gifts to loved ones while you’re still alive, tax deferred ones might be at the top of your consideration list.

Making gifts to loved ones is an important way to plan for your own financial future and to accomplish some of your gifting goals. However, how you approach this should vary based on your individual circumstances and the assets in question.

Retirement assets, such as qualified retirement plans in the form of 401(k)s or traditional IRAs are typically subject to ordinary income taxes when they get distributed. This is different than assets held in taxable accounts. Previously, individual lifetime transfers to people in lower income brackets was possible, but today retirement assets don’t get a step up in cost basis at death.

Normally IRAs will trigger a tax liability when transferred to a charity during life. However you might work with an estate planning attorney to create a qualified charitable distribution that allows for non-taxable transfers of IRA assets. The specifics of your plan should always be discussed with your estate planning attorney in Northern Michigan.      


Rachel M. Estelle
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