Tax Planning When a Spouse Dies (Part 1)

Tax Planning for a surviving spouse is no joke. Because the next tax year ALL things change from a tax filing perspective.

In the year your spouse dies you can still file Married Filing Jointly. However, in the years after that, you are now a single taxpayer. There is no tax bracket for a WIDOW, by the way.

There is one for a QUALIFYING widow, but that means you're caring for a child. Most likely that won't be you if you're taking Social Security. So, you're going to file as a single taxpayer the year after your spouse dies.

In this three part series, I show you EXACTLY what happens to your taxes, now - in the year you're still married filing jointly, and then next year, when you're single.

Trust me, it's not pretty.

This is a REAL WORLD example too, my friends. These are the exact numbers of a a very nice and sweet young lady who I was working with the other day.

Her accountant said not to do anything differently this year, which is the last year she'll file as a married filing jointly, as her husband died in April.

That's crazy talk! No way should she allow that extra standard deduction and higher tax brackets to go to waste. NO. WAY.

So, we're working on a plan where she should use the tax benefits this year to remove money, much more efficiently from her Traditional IRA.

However, as is the case with the tax code, if you are in a lower tax bracket and on Social Security, you're going to get hit with DOUBLE TAXATION.

I show you in this video how a $10k IRA distribution actually increases her taxable income by $18,500 and also increases her taxes by 60%!

It's crazy. But it's the tax code as it is set up today and has been for decades.

To avoid it, doesn't make the taxes go away only makes them worse.

So, BE PROACTIVE, my friends. Take the tax code by the horns and declare your dominion over it.

[karenblack]

My husband passed on April 11th 2019. I didn't get his W2's and cancelation of debt and interest paid til almost end of February 2020. Was I considered as single when I filed? Not to sure if things are done right with even the e-file. Because of the stimulus payment everything is messed up. I do not want any mistake the software made to come back on me. They already have sent me a letter to verify my identity.

[gcburkett]

I thought it would have been a good idea for my Dad to convert his IRA to a Roth IRA last year after my mom died. But my dad was not in a position mentally to think about this topic since my Mom passed away suddenly last Oct 25. Its hard to ever talk about end of life planning with you parents. He live off a pension so does not really need the RMD. I told him to think about doing a QCD this year but I don't know if he has set that up. This type of planning would be best done before the death occurs because you don't always have time after the death of a spouse before the end of the year.

[janetfacs]

You need a title on this video. The amount withdrawn from a Roth IRA doesn’t count toward Soc. sec. Provisional Income right?

[scottengh]

You might need to pay royalties for your music.