Episode 229: How to Leave More Wealth to Your Children After Taxes

This episode of Retire with Style continues the Retirement Planning Guidebook series by focusing on how tax planning changes when legacy and estate considerations are incorporated into the retirement planning process. Wade and Alex break down key estate planning concepts in a practical way, including step-up in basis rules, Roth conversion decisions tied to beneficiaries’ future tax brackets, inherited IRA distribution rules under the SECURE Act, gifting strategies, estate tax exemptions, and how trusts and life insurance can be used to manage estate taxes and liquidity needs. The conversation emphasizes that retirement tax planning is not just about maximizing your own after-tax income, but also about improving the after-tax outcomes for heirs and charities. Listen now to learn more.

 

Key Takeaways

• Retirement tax planning changes significantly when leaving a legacy becomes a priority, especially regarding how different account types are spent down. 
• Taxable brokerage accounts receive a step-up in basis at death, allowing heirs to avoid capital gains taxes on appreciation that occurred during the original owner’s lifetime. 
• Roth conversions can become more attractive if beneficiaries are expected to inherit assets during their peak earning years and face higher tax rates than the retiree. 
• Equal inheritances before taxes do not always produce equal inheritances after taxes, making asset location across heirs an important estate planning consideration. 
• In 2026, the federal estate tax exemption is $15 million per person, but future legislative changes could lower those limits substantially. 
• Several states impose their own estate or inheritance taxes, meaning some households may face state-level estate planning concerns even if they avoid federal estate taxes. 
• Annual gifting rules allow individuals to transfer up to $19,000 per recipient each year without reducing their lifetime estate tax exemption. 
• Life insurance can provide liquidity for estates and, when structured through irrevocable trusts, may help move future appreciation outside of the taxable estate. 
• The SECURE Act replaced many lifetime “stretch IRA” strategies with 10-year distribution windows for most non-spousal beneficiaries. 
• Inherited Roth IRAs still require distributions within the required timeframe, but those withdrawals are generally income tax-free to beneficiaries. 

Chapters

00:00 Introduction to Retirement Planning Guidebook 03:10 Tax Planning and Legacy Considerations 05:55 Strategies for Tax-Efficient Inheritance 09:11 Understanding Estate Taxes 11:55 Gifting Strategies and Limits 14:49 Life Insurance and Estate Planning 18:00 RMDs on Inherited Accounts

 

Links

📘 New Release: The Retirement Planning Guidebook (3rd Edition) Wade Pfau’s must-read Retirement Planning Guidebook just got even better. The 3rd Edition is now available and packed with the latest updates to help you design your retirement strategy with confidence. Grab your copy on Amazon or your favorite book retailer: https://books2read.com/Retirement

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”