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Often Overlooked Estate Tax Break Can Save Thousands of Dollars
IRD, or income in respect to a decedent, may save taxpayers thousands of dollars, but tax forms don't include a line item for it, currently tax return software does not include it, and many tax lawyers and CPAs don't even know its importance. In fact, one commentator suggests that billions of dollars of tax savings are being lost; another suggests that it is the most common estate planning error.
IRD is designed to offset some of the financial pain associated with being hit by estate taxes and income taxes. If combined, the two taxes can eliminate 70% of more of an inheritance.
It may be especially helpful to those who inherit IRAs. For example, by claiming the IRD deduction, one attorney saved $30,000 in taxes for a son in law who inherited an IRA. The deduction also can be used with other retirement vehicles, lottery winnings, and interest on unredeemed savings bonds, among other things.
Source: Wall Street Journal
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