How To Avoid Inheritance Tax

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

How to Avoid Inheritance Tax

For the Living Person: Utilizing Annuities with Enhanced Death Benefits

  • Example: Legacy ClassicMark with Heritage Maximizer Rider
    • Function: Offers a 30% bonus to the beneficiary.
    • Benefit: This bonus can significantly offset inheritance taxes.
    • Mechanism: On the event of death, the enhanced death benefit kicks in, providing extra funds to the beneficiary.

For the Beneficiary: Leveraging Deferred Annuities with Premium Bonuses

  • Key Strategy: Invest in a deferred annuity that includes a premium bonus.
    • Premium Bonus: Currently, some annuities offer up to a 20% bonus.
    • Tax Offset: This bonus can help reduce the inheritance tax burden.
  • Withdrawal Plan: Systematically take penalty-free withdrawals.
    • Advantage: This method allows for a gradual distribution, potentially lowering tax implications.
How To Avoid Inheritance Tax

Comparative Analysis of Annuity Strategies

StrategyProduct ExampleBenefit FeaturePotential Tax OffsetSuitable For
Enhanced Death Benefit AnnuityLegacy ClassicMark with Heritage Maximizer30% Beneficiary BonusHighLiving persons planning estate
Deferred Annuity with Premium BonusVarious ProductsUp to 20% BonusModerateBeneficiaries managing inheritance
How To Avoid Taxes On 401K Inheritance


Utilizing specific financial products such as annuities with enhanced death benefits and deferred annuities with premium bonuses can be effective strategies for both living individuals and beneficiaries to mitigate inheritance tax liabilities. For the living, products like the Legacy ClassicMark with Heritage Maximizer rider offer substantial bonuses to beneficiaries, which can offset a significant portion of the taxes. Beneficiaries, on the other hand, can leverage deferred annuities with premium bonuses and structured withdrawals to manage tax impacts effectively. These methods provide a strategic approach to handling inheritance taxes, ensuring a more beneficial financial outcome for both parties.

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How To Pass Money To Heirs Tax-Free

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Frequently Asked Questions

How do I transfer wealth to a family without paying taxes?

Gifting is the answer! The annual gift tax exclusion offers an easy and efficient approach to minimizing estate taxes while allowing you to shift income toward your heirs. Other techniques such as direct payments, loans given to family members, Grantor Retained Annuity Trusts (GRAT), and Roth IRA conversions can all be utilized in this endeavor – with help from an expert Tax Professional if necessary.

How do I gift a large sum of money to my family?

You can do this quickly and safely in numerous ways, such as writing them a check or wiring funds between accounts. Additionally, if the amount given is less than $17,000 per year for each family member, there will be no need to file gift tax returns. However, if it’s over that threshold, it still easily keeps track of donations -simply allowing you to file the necessary documents when needed.

Can I gift $100,000 to my son?

Have you ever considered gifting your son a large sum of money? Fortunately for you, the federal government has set a limit on lifetime gifts at $11.7 million per person ($23.4M combined for married couples). This means that if you wanted to gift up to 10 million dollars today – without any tax implications attached – it is 100% possible!

Do you have to report cash inheritance to the IRS?

Generally, you do not need to include your inheritance in your taxable income. Nonetheless, should the inheritance be regarded as an income related to a decedent, then taxes may apply.

How much can you inherit from your parents without paying taxes?

California residents do not need to stress – the state does not collect estate or inheritance tax. Moreover, only a handful of states require people who inherit money to pay an inheritance tax by 2023. So you can rest easy knowing that your inheritance is free from taxation!

Do beneficiaries pay taxes on inherited money?

Generally speaking, no. With exception to retirement accounts (such as a 401k, 403b, or IRA), life insurance proceeds, and savings bond interest, the beneficiary usually will not have to bear any income tax on their inherited wealth. However, if any of these funds were initially deposited with tax deductions in mind, those particular earnings are taxable when received by the beneficiary.

What can you do to avoid taxes on 401k inheritance?

To avoid taxes on 401k inheritance, it is advised to convert the inherited account into an Inherited IRA. When the funds are withdrawn, the beneficiary can opt for a stretch distribution over their lifetime, minimizing the tax burden. Consulting a financial advisor is essential to navigate the specific rules and regulations surrounding this process.

How much can you inherit from a trust without paying taxes?

The amount one can inherit from a trust without paying taxes depends on various factors. In the United States, the federal estate tax exemption is $11.7 million for individuals and $23.4 million for married couples in 2021. However, individual states may have their own estate tax regulations. It is advisable to consult with a tax professional for accurate information on this matter.

How to leave grandkids your retirement savings—and not a huge tax bill?

To leave your retirement savings to your grandkids without burdening them with a substantial tax bill, consider utilizing a trust. By creating a trust, you can distribute the funds to your grandkids while minimizing estate taxes. Consult with a financial advisor or estate planning attorney to learn how to set up a trust that aligns with your goals.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost if you purchase a policy. It helps us keep the lights on!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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