Don’t Leave Your Tax Deferred Accounts to Heirs
Like equities, taxable bonds produce capital gains every time the fund manager buys or sells securities, as this Fidelity article makes clear.
Don’t Leave Your Tax Deferred Accounts to Heirs
The IRS has a party whenever a high net worth individual dies and leaves their tax deferred accounts to their heirs. Letting this happen provides a windfall for the government that would be far better utilized if it stayed in your family, or went to an organization that aligns with your values.
This follows up on strategy 5 a bit, but when doing your estate planning, you want to do everything possible to avoid leaving money in tax deferred accounts to your heirs.
How you go about this depends in part on your goals and values. If leaving more money to your heirs matters more to you than minimizing your taxes, you might opt to pay taxes now b by withdrawing more money sooner b to reduce the tax burden facing your heirs. This may be a better option for reasons similar to what you saw in strategy 4. However, if your heirs have much lower income, they may not be hurt as badly if they inherited some of your tax deferred account.
The size of your estate and estate taxes might also impact your decision.
To be clear b this is not necessarily an either/or situation. You have many other options available, and other variables to consider. The income of your beneficiaries matters, as does the size of your estate and the estate taxes you may end up paying.