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Don't forget that there is an IRD deduction for one dying with an IRA in a taxable estate. Far too many people miss the fact that Income in Respect of a Decedent will generate a deduction based on the estate tax paid. It does soften the blow of having the estate get hit with FET and then the IRA being fully subject to income tax.

Although this might be better over on the Inheritance board, those people fortunate enough to be facing a taxable estate should consider cashing in the IRA and simply paying the income tax since the income tax paid is no longer part of the estate. Yes, I know that you are giving up the prospect of further deferrals but my experience is that the next generation doesn't wait very long before cashing in anyway. For the truly fortunate, and not too old or too infirm, why not cash in the IRA and use some of the proceeds to fund an irrevocable insurance trust in favor of the heirs. The income tax is paid (couldn't avoid that) and the life insurance proceeds from the trust are not subject to either FET or income tax.
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