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ANNUITY & VARIABLE ANNUITY TAXATION

ANNUITIES ARE HIGHLY TAXED FOR SPOUSE & BENEFICIARIES

ANNUITIES ARE ONE OF THE HIGHEST TAXED FINANCIAL INSTRUMENTS

ANNUITY GAINS ARE TAXED AS ORDINARY INCOME TAX AT HIGHEST TAX BRACKET

PLUS STATE TAX PLUS OTHER TAX MAY BE APPLICABLE

ANNUITANT DEATH RESULTS IN HIGHEST TAX DUE

IRA OWNERS FACE NEW HEAVY TAX REGULATIONS

ASK FOR A QUOTE FOR YOUR ANNUITY or IRA EXCHANGE   MAINTAIN TAX DEFERRAL   EXCHANGE ALL OR PART    SCHEDULE A FREE CONSULTATION

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ANNUITY & IRA TAXATION   FEDERAL AND STATE TAX BELOW

Some States plus Federal Income Taxes Total up to 50% Tax on Gain Plus Increase Other Income Tax

 

2022 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
Tax Rate For Single Filers For Married Individuals Filing Joint Returns For Heads of Households
10% $0 to $10,275 $0 to $20,550 $0 to $14,650
12% $10,275 to $41,775 $20,550 to $83,550 $14,650 to $55,900
22% $41,775 to $89,075 $83,550 to $178,150 $55,900 to $89,050
24% $89,075 to $170,050 $178,150 to $340,100 $89,050 to $170,050
32% $170,050 to $215,950 $340,100 to $431,900 $170,050 to $215,950
35% $215,950 to $539,900 $431,900 to $647,850 $215,950 to $539,900
37% $539,900 or more $647,850 or more $539,900 or more

Source: Internal Revenue Service

 

 

The SECURE Act Has Significant Tax Rule Changes for IRA Owners

“The SECURE Act changed a lot of what we believe about inherited IRAs,” said Rochelle Schultz, an estate planning lawyer at Weinstock Manion in Los Angeles. “Everyone,” she added, “needs to bring it up to their estate attorneys or financial advisors to make sure beneficiaries understand what’s going to happen.”

The 10-year rule hits retirement accounts inherited from people who pass away on or after January 1, 2020. Wealth advisors call the curb the death of the “stretch IRA,” because an heir can no longer “stretch out” withdrawals from the account over her lifetime. The change reflected the Biden administration’s desire to expand retirement options for Americans while curbing the tax benefits of passing tax-deferred wealth to heirs.

Five years
IRS rules that pre-date the SECURE Act say that if a taxpayer dies before beginning required minimum distributions, typically at age 72, and hasn’t specified who will inherit their IRA or 401(k), then the account goes into the deceased’s estate. The estate’s heir or heirs then have five years to drain the account. The five-year rule also applies to inherited Roth IRAs in existence for less than five years. And it applies to some beneficiaries who inherit a retirement plan through a so-called beneficiary account, like a trust.

Under prior IRS rules, the beneficiary of a broad type of estate planning vehicle known as a “see-through” trust is treated as if she directly inherits the trust’s assets, even as the vehicle is technically the beneficiary. The IRS “looks through” the trust to see that an actual human being — the trust’s beneficiary — is there. Before the 2019 law, those people could stretch out withdrawals over their lifetime. Now, depending on whether the trust is properly set up, the 10-year deadline could be five years.

That's in part because IRS rules for see-through trusts are strict. Along with record-keeping requirements, the tax agency requires that the vehicles be irrevocable, valid and legal in the state where they’re set up and clear about the identity of its beneficiaries. If a trust doesn't meet those requirements, beneficiaries can be required to drain them in five years.

The issue is that the SECURE Act doesn’t spell out whether its 10-year rule applies to see-through trusts. Nor has the IRS offered guidance on the issue. If the rule doesn’t apply, then some beneficiaries of those trusts might have to empty out an IRA within five years as before — an outflow that can spike an heir’s income and tax rate.

“There is still ambiguity as to how the rules surrounding ‘see-through’ trusts will apply post-SECURE Act,” wrote Fidelity Investments earlier this year.

 

 

 

DISCLOSURE NOTICE

The information provided herein is stated to be truthful and consistent, in that any liability, in terms of inattention or otherwise, by any usage or abuse of any policies, processes, or directions contained within is the solitary and utter responsibility of the recipient reader. Under no circumstances will any legal responsibility or blame be held against the developer, publisher, or author for any reparation, damages, or monetary loss due to the information herein, either directly or indirectly. Ken Wheeler Jr. recommends that one's consideration of practice or use be counseled by a tax advisor familiar with one's personal financial position, business position, and estate tax position. .

      Asset Advisor

Ken Wheeler Jr.  CPRES

 

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