Estate taxes

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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catdoctor
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Joined: Wed Nov 20, 2019 11:30 am

Estate taxes

Post by catdoctor »

For estate tax purposes, is money in a traditional IRA valued the same as money in a Roth IRA?
Gill
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Re: Estate taxes

Post by Gill »

Yes, both included in the gross estate.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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cheese_breath
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Re: Estate taxes

Post by cheese_breath »

What is your question? The size of the estate, or the value to the beneficiaries?

Beneficiaries receiving tax deferred money such as a tIRA will have to pay income taxes on their withdrawals. The taxes have already been paid on the Roth money. So to the beneficiary a $20K Roth inheritance is more valuable than a $20K tIRA inheritance.
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catdoctor
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Joined: Wed Nov 20, 2019 11:30 am

Re: Estate taxes

Post by catdoctor »

My question: If one has a 20k Roth, it is worth 20k. A 20k trad. IRA is only worth (20k - the income tax due). So, when an estate is valued for estate tax reasons, is the trad IRA valued at 20k, or (20k - tax due)?
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TomatoTomahto
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Re: Estate taxes

Post by TomatoTomahto »

catdoctor wrote: Sun Jan 17, 2021 9:22 am My question: If one has a 20k Roth, it is worth 20k. A 20k trad. IRA is only worth (20k - the income tax due). So, when an estate is valued for estate tax reasons, is the trad IRA valued at 20k, or (20k - tax due)?
AFAIK, the traditional IRA is valued at full face value. That’s one reason that Roth accounts are preferred for bequests.
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oktax
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Re: Estate taxes

Post by oktax »

Yes, traditional and Roth IRAs are valued the same for estate tax purposes. As others have pointed out, the traditional IRAs also will have income tax consequences on withdrawal to the beneficiaries. Because of this, Roth conversions during the life of the owner or using traditional IRAs to fund charitable gifts/bequests can be a good plan.
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