Legal Blog

The Weekly Scenario: How to Avoid Paying Income Taxes on an IRA

Question: Is there any way that I can eventually avoid paying income taxes on my IRA?

Answer: When funds are distributed out of an IRA (other than a Roth), income taxes are generally due. If you leave your IRA to your spouse or children, taxes can often be deferred, but of course taxes will be eventually paid.

However, if you leave the IRA to a 501(c)(3) charity, the IRA proceeds will be excluded for both estate and income tax purposes. This way, the charity will receive 100% of the gift (qualified charities do not pay income taxes) without reduction for income taxes.

 

 

As always, if you have any questions or would like to learn more, please contact me at sshane@offitkurman.com or 301-575-0313.

ABOUT STEVE SHANE

Steve Shane Casual SmallSteve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

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