Welcome to the Doctor’s Eyes Only podcast, and today Vestia Partner and CEO Lauren Oschman talks about ways that doctors can minimize a potential tax burden for their heirs when transferring wealth. At the time of this recording, the threshold that needs to be met to qualify for estate taxes is so high that many physicians don’t consider taxes when doing  estate planning. There are some things to consider in relation to the type of accounts that house your retirement funds, and the tax benefit you received while accumulating assets could cause a potential tax implication for the heirs who inherit those assets. 

“We talk about how these assets are probably your highest tax burden in retirement just because there's so much accumulating that no one's ever paid taxes on and all of it’s taxed as income tax when you retire. What happens when you pass those assets onto your heirs? It actually gets even worse. So if you are to leave an IRA, a 401k, things like that to your kids, under current tax law, your kids have to withdraw those funds within 10 years of receiving them and they're all taxed as income when they pull those out because none of that has ever been taxed before.”

At a recent conference, and something that helped inspire the message delivered in this episode, a speaker said to think about leaving taxable things to tax free people or entities, and tax-free things to taxable people or entities. One of the ways to do this is by considering your charitable interests when electing beneficiaries on your IRA or 403B. Non-profit charities don’t pay income taxes, so what could cause a tax implication for your kids, would potentially not be taxable to your favorite charity. There are things to avoid, and as Lauren explains in the podcast, just because it is stated in your will that you want a certain amount of money to be paid to your favorite charity, does not mean that those funds will come from your IRA. 

“The other thing to think about here, and I see this in estate plans with physicians quite a bit. I’ll have charitably inclined physicians, and what they'll do is they'll put in their will or in their trust document that at their passing, they'd like either a certain dollar amount or a certain percentage of their estate left to a charity or a number of charities. So this is actually decently common for me to see with physicians. When you do that, that's automatically coming out of those step up and basis assets. Why is that? Because the IRAs and 401Ks have a beneficiary on the accounts. They pass outside of your will, and they're often not owned in your trust.”

A lot of information has been shared in this podcast and Vestia Personal Wealth Advisors are here to help should you have any questions. Send us an email at myteam@vestia.com, and one of our trusted expert Financial Advisors will be in touch. Thank you for tuning in!

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