8. Think about the future when referring to assets
In general, if you want to refuse assets that would place you into a higher tax bracket, you must do it within 9 months of a spouse’s death. Experts warn to tread carefully here, because giving up assets so early into widowhood can be fraught with regret.
The SECURE Act comes with another problem when it comes to the disclaiming decision, notes Philip Herzberg, a financial planner in Miami with The Lubitz Financial Group. The law forbids nonspouse IRA beneficiaries to stretch distributions over their lifetimes, potentially delaying tax payments for several decades. Now, the money must be distributed and taxes paid within 10 years.
“A couple of years ago we advised a 61-year-old widow with a couple of adult kids in high-tax brackets to disclaim an IRA for the kids, who were in their 30s,” he says. “Today we wouldn’t do that” because the faster liquidation would create big tax bills for the kids.
