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PSA: How to Save On Taxes

If you're like most people, you want to pay less taxes, not more. What most people don’t realize is that there are easy ways to avoid paying more taxes. One way you can avoid paying more taxes is by choosing to receive distributions as the beneficiary of a qualified retirement account in annual installments—NOT in one lump sum.

If you’re the beneficiary of a loved one’s qualified retirement account, do not take the distribution in one lump sum! Qualified retirement accounts include a traditional IRA, 401k, or a thrift savings plan—these accounts are pre-tax, i.e., taxes have not yet been paid for the money in these accounts. Taxes have to be paid upon distribution, however. When a distribution is taken as a lump sum, that sum becomes a part of your taxable income for that year, likely bumping you up into a higher tax bracket. As a result, you may end up paying more (or potentially much more) in taxes.

INSTEAD, you can choose to receive distributions in installments over a period of years, minimizing your tax liability. The law allows you to roll over the account into another qualified account (an IRA) and receive annual distributions, either for the duration of your life (for a surviving spouse) or for up to 10 years (for children or grandchildren). This way, your total taxable income is less.

If you’d like to learn more about how we can help you create an estate plan that will smoothly and efficiently transfer your estate to family or other beneficiaries, please contact us at (813) 244-7758 or Cheers! Ross Spano

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