A Family Tax Strategy To Help Widows, Children, And The Disabled
If a family member or friend is disabled, suffers from a chronic illness, or is a minor child, they are entitled to special break under federal tax laws that can change their lives. New rules, that went into effect January 1st, 2020, require the beneficiary of inherited IRA or 401(k) accounts to deplete the money in those accounts within 10 years. Disabled, chronically ill and children are exceptions to those rules. They can stretch out distributions over their actuarial life expectancy, thus, leaving the assets to compound tax-free for a much longer period.
For a disabled individual, who inherits federally qualified retirement assets, for instance, stretching out distributions over decades could transform the inheritance into an income stream for life. The same is true for a widow. If you own a sizable IRA, 401(k) or other retirement plan account, and your beneficiary is your spouse, an individual with a disability, chronic illness, or a minor child, planning properly to taking full advantage of these rules can make a big difference in the life of a loved one who can use the help.
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