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In a Kiplinger report dated February 2000, an article by Ronaleen R. Roha, "Happy Endings" in part said the following:

"The federal estate tax and federal and state income taxes can snatch upwards of 75% of (IRA). That's right: Uncle Sam can easily become your primary heir, regardless of what your will or other estate-planning efforts intend.

Unlike most assets, which pass to your beneficiaries income-tax-free, traditional-IRA money is taxed in the heir's top federal and state tax brackets -up to 39.6% for the feds along. Although money in a Roth IRA goes to beneficiaries income-tax-free, balances in both traditional and Roth IRAs can fall victim to the federal estate tax, at a rate as high as 55%. (The federal tax tab can't hit 95% because - - in a surprising show of generosity by Congress - - IRA money that pays estate taxes isn't hit by the income tax, too.)

Surely, your're not working so hard and saving so sytematically to leave behind a big stash for the IRS. Fortunately there are ways you can help your heirs keep the tax man at bay. Fail to make the right choices, though, and you can leave behind a costly mess."

There is more upfront and after this part of the article, but my point is in the above where it talks of generosity by Congress. Does anyone have an answer as to why both taxes wouldn't apply regardless if the beneficiary is "The estate", or your children ????

I haven't read of this change in law in any other periodical.

Pixy, Do you have an answer ?


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