Estate Tax Help Could Be on the Way

A bill pending in Congress could create a significant estate-planning opportunity for family members other than spouses.

Currently, someone other than a spouse who is the beneficiary of a retirement plan must distribute inherited assets on a payout schedule that is set by the plan administrator. Typically the time period is five years or less, and taxes must be paid within that timeframe.

But if the bill becomes law, family members beyond spouses could take advantage of more favorable payout schedules by transferring the money into an inherited IRA. Then they can stretch account distributions over the course of their lifetimes, and get the benefit of a lifetime of tax-deferred growth, according to Ed Slott, a Melville, New York-based CPA and IRA expert.

Spouses are already allowed to make such transfers under current law. ...