. . . that Individual Retirement Accounts (IRAs) get Double-Taxed?

First, the IRA gets hit with the Estate Tax. Then, your beneficiaries must pay their regular Income Tax on the remaining proceeds of the IRA. A great way to avoid this double-taxation is to leave the proceeds of your IRA to the Sigma Nu Educational Foundation. By doing so, your estate will receive a charitable tax deduction for the amount of the IRA and neither your estate nor your heirs will pay tax on the value of the IRA.

Illustration:
An IRA of $500,000 is part of a $3,000,000 estate that is left to a beneficiary in the 33% tax bracket:

	IRA Balance before taxes	$500,000
	Less Estate Tax (47% tax)	$235,000
	Less Income Tax (33% tax)	$ 87,450
	IRA Balance after Double-Tax	$177,550

As you can see from this illustration, while you had planned to leave $500,000 to a beneficiary, they will receive less than 36% of that amount ($177,550) due to the double-tax. Another way to view this illustration is that your IRA left to the Foundation provides almost 3 times the benefit to Sigma Nu than it would to a taxable beneficiary.

Benjamin Franklin said, "In this world nothing is certain but death and taxes." While this still holds true, there are ways to reduce the amount of taxes that one's estate must pay. How much do you know about estate tax? Take our new "Estate Tax Quiz," and find out.