Micah Shilanski (00:00.5)

Micah, it’s an inheritance and therefore it’s tax free. But is it? Hi, I’m Micah Shalansky, managing partner and wealth advisor with Carson Wealth. And today I want to talk to you about a common misconception I hear not only from the federal community, but across the board. And it has to do with such a nuance of details, but can mean tens of thousands of dollars in excess tax. And here’s what I hear. Someone passes away.

And they say, great news, Micah. I talked to the executor. talked to the personal representative. talked to the attorney, the CPA, et cetera. And there’s no inheritance tax on it. Well, that’s what sounds really good. But whenever I hear that, my ears always perk up a little bit more. And I want to see everything. like, before you make any moves, before you move any money, get me the statements. Get me the accounts. Get me all these things. I don’t want to take a personal representative’s word for it. I want to see the evidence myself. Now, why is that? Because I’m an over-controlling person? OK, possibly. That could be in there a little bit.

But also I’ve seen this go wrong and clients have to pay tens of thousands of dollars in excess taxes they shouldn’t have had we had done things correct. So here’s how the conversation normally goes. They talk with somebody and they say, hey, is this going to be taxed? And I’m going to blame it. And the state planning attorney said, that’s happened before to me, right? A client talks to a state planning attorney and says, hey, am I going to have taxes on this inheritance? And the state planning attorney says, no, there’s no inheritance tax. And my client said, great, it’s tax free. No, no, no, those aren’t the same thing.

because we have multiple types of taxes, at least four different types of taxes we’re always thinking about. There’s an ordinary income tax, right? Which is the worst type of tax they pay. That’s the taxes you pay, you know, every single year on your paychecks, you know, your W-2 that you get in your first benefit, social security subject to ordinary income tax. There’s capital gains tax. That’s a little bit better of a taxation. Then there’s a state tax, right? And there’s a horrible taxation that’s there, but there’s a pretty high limit before people are subject to it, about 19 million in change, right? So if your state’s worth less than 19 million if you’re single,

Great news, you probably don’t have a federal inheritance tax. You may still have a state inheritance tax or a state tax, right, that could be there. And then we have gift taxes, right? So we’re always looking at financial advisors about all four of those different areas. An estate planning attorney is generally only considered in one of those areas, is concerned about it, and that’s estate taxes. Do you owe money because of the debt, because of the value of the estate? Does it exceed that 19 million? Do you owe taxes? Well, the answer is no.

Micah Shilanski (02:19.599)

The estate tax attorney, right? The estate planner says, great news. You don’t owe any estate taxes. And my clients hear this money is tax free, but that’s not the case. Just recently we had a client this last year, had a level one pass away. Parent, they received several hundred thousand dollars and we’re trying to collect it and find out where this comes. Some we knew it was going to be tax freaks. We knew the source of it. Some was definitely going to be taxable. And there’s a large part of money we couldn’t know about. It was handled by another advisor. It was handled by the personal representative. And basically all my client was got a check and they were told it’s tax free money.

sure enough come tax time, it wasn’t tax free money. It was a state tax free, but they’re subject to income taxes. And he had to pay tens of thousand dollars of income taxes on that money because it was taxable income kind of blew up his tax bracket a little higher than it should have. news. didn’t affect his Medicare premium, but a lot of things were kind of happening that we didn’t anticipate in there because this was taxable money. Had we had known that to begin with, we would have structured those distributions differently. Now,

After someone has passed away, very little planning we can do. But while you’re still alive, there’s a lot of planning you can do. So think about your own estate. How is that really set up? How do you make sure that your loved one, your spouse is taken care of and you’re not penalizing them when you pass away? Your kids are taken care of, you’re not penalizing them with taxes when you pass away? And also think about it too, before you receive any large sums of money, I always tell my clients, before you receive any large sums of money, hit the pause button, pick up the phone and call me and let’s go through the best way to receive it.

to minimize your taxation. If you don’t have your estate planning documents in order, if you don’t have a plan to beat the IRS out of tens of thousands of dollars in taxes for retirement, boy, work with somebody that knows how to do this. Click the link below, visit someone on our team. We’re gonna walk you through in a retirement confidence session what needs to happen to make sure you’re not overpaying the IRS. So next time, happy planning.

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