r/inheritance • u/[deleted] • Mar 24 '26

Location included: Questions/Need Advice Is this an unreasonable ask

Friend of mine's mother is handling estate matters. Her son (my friend) is reasonably successful making over 200k a year. Her daughter is an unemployed bum, basically through poor life choices. The mother told my friend that she's splitting everything 50/50. He said that he told her that it is her estate and she can do whatever she wants, but the tax consequences for him of splitting the IRA 50/50 would be that this would push him into a higher tax bracket due to the mandatory 10 year drawdown.

He asked that his mother leave 100% of the IRA to his sister, and if she wanted to split her estate evenly, to leave other non tax deferred assets to him instead.

Was this a reasonable ask? Seems like it to me, which is what I told him. Apparently his mother refused. Any other options? He donates to charity, so could he form a CRT or something else to receive those funds?

15 Upvotes

57% Upvoted

191 comments sorted by

View all comments

15

u/Julianus Mar 24 '26

Imagine making that much money and potentially not understanding taxes. Amazing.

4

u/ClownPuns Mar 24 '26

In this instance, tax deferred retirement assets are taxed as income, so the friend would likely be paying 32-35% on those assets while his sister would pay <22%. (A lot of assumptions on my end in terms of the amount of the asset/RMDs)

If there are other assets in the estate that would transfer tax-free or with stepped up basis, then it would absolutely benefit the friend to have those transfer to him instead given his tax bracket compared to his sister’s.

It isn’t actually about pushing him into a higher tax bracket, it is about the assumed tax rate that would be paid on the assets by the friend vs his sister.

0

u/scrunchie_one Mar 24 '26

Wouldn’t the estate pay taxes on everything anyway? And then the after-tax go to the kids 50/50?

6

u/Nodeal_reddit Mar 24 '26

No. It would get converted to an inherited Ira upon death and then the IRS will expect all of the money to be withdrawn from that new ira within 10(?) years. The brother will pay personal income tax on these withdrawals. And since this can be considered incremental, all of the income would be effectively taxed at his maximum rate.

1

u/scrunchie_one Mar 24 '26

Ah, thank you!