503: How to Keep MORE of Your Inheritance From the IRS (Avoid These Tax Mistakes!)

02/16/24 • 44 min

With solid tax planning, receiving an inheritance could provide an enormous boost on your journey to financial freedom. One misstep, on the other hand, and you could be lining Uncle Sam’s pockets. Fortunately, we’ve brought on a tax professional to help you keep as much of your newfound money as possible.

There are two certainties in life: death and taxes. In this episode of the BiggerPockets Money podcast, we’re combining them. Sean Mullaney, The FI Tax Guy, returns to the show to lend his expertise on inherited investment accounts. Whether you’re the spouse, child, or sibling of a loved one who has recently passed, you’ll need a plan for managing these financial assets. Otherwise, a huge inheritance “tax bomb” could be waiting for you down the line!

Sean discusses the four “buckets” of assets you can inherit and the steps you should take in each scenario. You’ll also learn about the “step-up in basis” exemption that allows you to dodge capital gains tax on certain accounts, as well as when you might need to take required minimum distributions (RMD) —even if you’re far from retirement. Grab your pen and paper as we get into the nitty-gritty of inheriting wealth.

In This Episode We Cover

How to pay less tax on your inherited investment accounts

The four “buckets” of financial assets you might inherit

Navigating the “ten-year rule” and preventing a HUGE tax bill

Dodging capital gains tax with the “step-up in basis” exemption

How to avoid early withdrawal penalties on spousal accounts

The “worst” account to leave for an heir (and what to do with it instead!)

How to pass a retirement account on to a spouse, child, or sibling

And So Much More!

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