How To Avoid State Income Tax On Distributions From IRAs
Do you own a large IRA and live in a state with an income tax? Consider setting up a non-grantor trust in a state with no income tax. While this financial planning tactic may sound exotic, it's common sense and can make a material difference in your life and beyond.
Placing the IRA in a non-grantor trust in a state with no income tax avoids state income taxes. That's big! In addition, beneficiaries of your IRA would also benefit. Your spouse, children and other IRA beneficiaries could expect to get more from your largesse after you're gone.
Under the SECURE Act bill expected to be enacted before the end of 2019, your heirs would be required to distribute the IRA you leave them within 10 years.
According to Financial Advisor News Service, which we are licensed to distribute, naming your IRA beneficiary a non-grantor trust in a state with no income tax may allow your beneficiaries to avoid paying state income tax on the distributions from the IRA.
To be clear, income from your IRA could be free of state income tax by applying this strategy! A recent U.S. Supreme Court decision upheld the legal concept behind this strategy and out-of-state trusts are likely a device that retirees will hear about in the mainstream financial press in the months ahead. This is a fluid new area of legal and financial regulation and requires legal and tax advisors familiar with your personal situation.
© 2020. All Rights Reserved.
- Watch The Fed Closely In The Months Ahead
- Say Goodbye To Stretch IRAs And Get A New Plan
- Tax Alert: Plan Now For The Demise Of Stretch IRAs
- Prepare For A Sweeping New Law On Retirement Account Taxes
- U.S. - China Trade War Coverage Distorts Economic Reality
- How To Give Gifts And Not Trip On The Gift Tax
- Give To Charity From An IRA To Lower Your Tax Bill
- Staying Realistic About Investing Amid Volatile Market Swings
- How To Swap Real Estate And Defer Taxes, Maybe Forever
- As A Final Act of Love, Plan Thoughtfully
- How To Sell Your Small Business And Pay No Taxes
- Risk And Tax Effects Of An Installment Sale Of A Home
- The New Math Of Renting Out A Vacation Home
- Opportunity Zone Investment Frenzy Requires Caution
- The Most Important Financial News Of 2018