4-minute Money Ideas

How to Avoid Tax Mistakes When You Receive an Inheritance By Douglas Goldstein, CFP® When receiving an inheritance, it’s important to avoid making tax mistakes. Certain tactics, such as opening a U.S. brokerage account (see below for an interactive tool) can help. Watch out for these mistakes: Mistake #1 – Taking money out of an IRA To maintain the tax-deferred status of an inherited IRA (Individual Retirement Account), the money must remain in a specially titled account. As an heir, you can transfer the IRA into a “beneficiary IRA” (a.k.a. “stretch IRA”) and not pay taxes on the account’s capital growth until money is withdrawn. Transferring the money overseas jeopardizes the tax beneficial status. As many overseas bankers and investment advisors may not know this crucial piece of information, work with professionals who are well-versed in cross-border investing and tax law. Mistake #2 – Choosing the wrong investments for an IRA The IRS allows U.S. citizens not to pay capital gains tax (or tax on interest a