A: Barb this is a superb question. I can see you have done some homework and this good. One of the most overlooked taxes that heirs in high-income tax states overlook is the future income tax that their heirs could be forced to pay related to IRAs, 401ks, and other qualified accounts that they may inherit someday. This is especially true under the SECURE Act of 2019.
Secondarily, your heirs may also be liable for additional taxes on the funds that they inherit within some of those same states. This is a
tax that falls under what is called income-in-respect to the descent. It is covered under section 691 of the Internal Revenue Code. It is a way for some states to not only apply a tax on certain income calculations but also as it relates to additional taxation on your overall estate value. Visit www.fb.com/askdearderek to learn more on how to carefully plan to avoid or mitigate these often overlooked tax traps.
