question re; estate tax and 401(k)s

You may not know it but if you leave your heirs money in a 401(k) they pay tax on it as regular income. this often means it is taxes at the highest rate possible as it is an increase in their income. This money is also subject to the estate tax, assuming you have an estate of sufficient size.

My question is how many people leave 401(k) money in their estate?
How much money on average is left in those estates that do contain 401(k)s?
Any ideas on where I might look to find these out?



I am writing a letter to the editor in hopes of making Hastert look like the unfair tax cheat he is.
My congress critter Denny has not paid any tax on his $2 million profit as he has reinvest it in land, and if his heirs get it on his death they will pay no income tax on it ever! They may have to pay an estate tax if we can get ride of these clowns before they get rid of more of the obligations of the rich to society.
Thanks in advance for you help

It was NOT a large estate, and ALL of the non-retirement account money got eaten up by estate taxes and lawyer fees.

Here's the way I figure it, based on a decade of experience as a probate attorney: most folks with a 401(k) or IRA have a beneficiary named on the account, so it passes outside of probate and thus would not appear on an estate inventory filed with the court. In addition, 98% of estates are below the level where the executor has to file an estate tax return, which is pretty much the only other place where there would be a written record of all of the estate assets.

So theoretically it's possible to answer your question, but it would require selecting a large enough random sample of recently deceased people, and then contacting their families to see if there was a 401(k), and all your other questions.

Still, your points are valid, and I think they would be just as strong even without the figures you seek.

that's kind of my point, the tax would likely be much higher on 401(k)s then on estate taxes since the estate tax has a $million + standard deduction off net value. Should the estate tax cut currently being pushed by Hastert go into effect his children's tax on the net profit on his land would be zero.
Is it not true that whether or not the funds go through probate the recipient of it is taxed as regular income? p.s. not trying to make a point here just askin.

When the 401(k) funds are withdrawn the recipient pays income taxes as you said. My point was that in my opinion you don't need to cite actual numbers in order to make your argument.

lifetime of the person's who has left the 401k behind.

I'm not convinced yet that there's something unfair going on.

been taxed in Hastert's situation. In fact most of the money in estates in unrealized capital gains income. This is the central lie in the GOP argument.

Also the 401(k) money IS taxed, unrealized capiatla gains not taxed.

get to deduct the principle you pay from your earned income that year in order to reduce your taxable income. That money for the investment came from money that was more likely than not taxed as earned (or unearned) income.

The 401k principle was used at one point to reduce your earned income, and you got a big tax break on it, so taxing it as income to your heirs is just a way to make sure that the 401k tax break (which was not designed to totally escape income tax, but is designed to push into the future the point when the principle is taxed as earned income) doesn't turn into a mechanism for completely escaping tax.

And not getting a cap gains hit if you flip real estate into a similar or more expensive property -- that's another issue. There is some logic to that too. Without it, land would have to increase in value by 30% every time you sold it if you didn't want to see your business shrink. Without that break, there probably be no commerical real estate business. People would never sell property.

I might be missing something, so please keep trying to explain your concern to me.

after the first 2 million - does it affect you?

Atleast that is what I recall...anybody know about this?