Talk:Inheriting an IRA

Could you add a non-legalese explanation to the section on estate tax deductions, or a link to an IRS document? I believe what it means is that if a traditional IRA was included in a taxed estate, and you take a $5000 distribution from the IRA, you pay income tax on the $5000 but you may receive a credit in some amount against the estate tax that was already paid. If this is the case, it may make a traditional and Roth IRA be a wash for inheritance purposes. Grabiner 04:01, 5 August 2008 (UTC)
 * Not, Bob, but I did find a plain language quote explaining the deduction. Also check out Ed Slott's article How the IRS helps IRAs . The deduction may make the estate tax imposition on an inherited Traditional IRA and Roth IRA neutral, but remember that the beneficiary's subsequent RMD's from the Roth IRA will be tax free to the beneficiary, while tax will be owed on the RMD's from the Traditional IRA. Blbarnitz 13:39, 5 August 2008 (UTC)
 * The part Barry added is definitely a bit easier to follow. The part I added is pretty much straight out of the IRS publication, which is probably why it's a bit dense. But certainly don't worry about the fact that I slapped that part up there. It's a wiki. If it stinks, feel free to re-word it or just delete it altogether. I just put that bit of info up to get the ball rolling :) --CyberBob 16:40, 5 August 2008 (UTC)
 * Thanks for the clarification, and this does confirm that it is a wash, because the IRS rule is designed to make the conversion fair and avoid tax being paid on tax. In the posted example, if you are in a 25% tax bracket, you could either inherit $50,000 from the traditional IRA or $37,500 from a Roth if it had been converted.  The estate tax on the Roth would have been $15,375, leaving you $22,125 after tax.  The estate tax on the traditional IRA was $20,500, but you deduct that $20,500 from your taxable income, paying $7,375 tax on the remaining $29,500 and leaving you $22,125 after tax.Grabiner 04:20, 6 August 2008 (UTC)