Legacy Estate Consulting

Spring Hill Tennessee

615-855-7091

Assisting you TO redirect the hidden tax in retirement assets

Assisting you TO redirect the hidden tax in retirement assets


Mike Cowart, Sr.

Fellow in Charitable Estate Planning (FCEP)

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Mike Cowart, Sr.

Fellow in Charitable Estate Planning (FCEP)

A Note From Mike

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Since November of 2017, I’ve assisted couples and individuals in redirecting millions of dollars from the IRS to their favorite charities.


There is a hidden tax in your retirement assets, which is the federal income tax due upon the death of an individual or surviving spouse. Your heirs cannot receive these assets without paying the income tax with an average liability of 25% based on 2019 income tax brackets. The great news is that you can redirect this liability to your favorite charities!


If your estate exceeds $11.4 million as an individual or $22.8 million for a married couple, there is an additional 40% federal estate tax. 


The IRS classifies these assets as income in respect of a decedent. (I.R.D.)


“A common example of these I.R.D. assets is a tax-deferred retirement account such as a traditional IRA, traditional 401(k), 403(b) and others.  There are other I.R.D. assets as well, such as tax-deferred annuities and savings bonds.  All of these assets have an element of deferred income built into their value.  If the original owner were to liquidate the assets, he or she would owe ordinary income tax on the deferred income portion.  When these assets are inherited, the deferred income element does not disappear.  The heirs will have to pay the income tax that is due on these assets.” Jeremy Pharr, J.D, FCEP


Thus far, my clients were not aware of this tax liability, or the ability to redirect it from the IRS to their favorite charities. 100% have chosen charities to be a more effective channel to benefit society.


As a Fellow in Charitable Estate planning (FCEP), I have the education and experience to assist you in creating a transformational legacy.  I would be honored to be involved in this life-changing process.

Hidden Taxes on Your Retirement Assets

IRD-income in respect of a decedent

Jeremy Pharr J.D, FCEP


Most people fail to realize that there is a “hidden tax”, which may impact their estate.  This “hidden tax” is the income tax in retirement assets upon the death of an individual or surviving spouse. It may seem counter-intuitive to refer to the income tax as a hidden tax since we all have to deal with the income tax every year. But when it comes to estate planning, it is the income tax that is often overlooked.  As an attorney, my focus in estate planning tends to revolve around the big picture of how the assets will be transferred to the heirs.  Which means my focus tends to center around the “transfer taxes,” such as the estate tax and gift tax.  The income tax tends to be the accountants’ territory.  Besides, most assets are not taxed as income when they are inherited anyway.  However, there is an exception to this general rule that actually impacts a large percentage of individuals and couples.  The exception is any asset that is referred to in the tax code as an I.R.D. asset (Income in Respect of a Decedent). 


I.R.D. assets are assets that would be taxed as ordinary income if they were left in the hands of the deceased person who owned them.  A common example of these I.R.D. assets is a tax-deferred retirement account such as a traditional IRA, traditional 401(k), 403(b) and others.  There are other I.R.D. assets as well, such as tax-deferred annuities and savings bonds.  All of these assets have an element of deferred income built into their value.  If the original owner were to liquidate the assets, he or she would owe ordinary income tax on the deferred income portion.  When these assets are inherited, the deferred income element does not disappear.  The heirs will have to pay the income tax that is due on these assets. 


Under the current tax law (Tax Reform Bill), very few people have to worry about paying estate tax, as the federal estate tax exemption was increased to $11.4 million per individual or $22.8 million for couples.  However, many of you have a portion of your estate that is comprised of some form of I.R.D. asset (retirement assets).  The taxable nature of these assets lends itself to a discussion about self-directing the tax liability built into these assets through planned giving.  I believe the question we should be asking is, “If your heirs are ultimately going to lose a large percentage of the value of these assets to taxes, is there a better use for these assets that will eliminate the taxes?”  The answer for most of you will be “yes.”   As we discuss the tax benefits of planned giving, we may want to move away from the traditional discussion of estate taxes and toward the topic of income taxes.  The income tax is the “hidden tax” that you may not realize will impact your estate.

When the executor of your 



estate writes a check, 



would you prefer the check 



be payable to the IRS 



or to your favorite 



charities?

Find Out More

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Transformational Legacies

Spring Hill, Tennessee, United States

615-855-7091