Minimizing the 'Triple Tax'

Brody, Lawrence; Rothermich, Douglas
October 1994
Journal of Financial Planning;Oct94, Vol. 7 Issue 4, p155
Academic Journal
The article focuses on retirement tax benefits. At the death of an individual who has significant retirement plan assets and whose estate will be subject to the estate tax, those retirement plan benefits may be subject to tax at three different levels, two levels of estate tax plus the income tax. The first level of tax is that retirement plan assets are includible in an individual's estate for estate-tax purposes. The second level is that to the extent the plan balance at the participant's death exceeds the present value, on a life-expectancy basis, of a hypothetical annuity with distributions of $150,000 a year, the "excess retirement accumulation" will be subject to an additional estate tax of 15 per cent. This ass-on tax is partially offset by a deduction against the first estate tax. The third level states that since there is no step-up in basis for retirement plan benefits, all amounts received by the participant's designated beneficiary will be subject to income tax, as received. The tax is offset by an income-tax deduction for the estate tax attributable to the plan assets in the decedent's estate.


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