What does a marital deduction allow for widows inheriting an IRA?

What does a marital deduction allow for widows inheriting an IRA?

• A. Tax deferral on withdrawals
• B. Full access to funds
• C. Exemption from estate tax
• D. Increased contribution limits

Answer: (A)

A marital deduction allows for significant tax advantages when it comes to inheriting an IRA. In the context of a widow inheriting an IRA, the primary benefit is tax deferral on withdrawals. This means that the widow can take distributions from the IRA without immediately incurring taxes on the amount withdrawn, allowing the funds to continue growing tax-deferred. This can be particularly beneficial for financial planning, as it provides the flexibility to withdraw funds at a later time when the overall tax situation might be more favorable. While it might seem that full access to funds, exemption from estate tax, or increased contribution limits could play a role, they do not accurately describe the specific purpose and benefit of the marital deduction as it pertains to IRAs. The focus of the marital deduction is primarily on allowing tax-deferral opportunities for the surviving spouse, which helps in better management of inherited retirement funds.

A marital deduction allows for significant tax advantages when it comes to inheriting an IRA. In the context of a widow inheriting an IRA, the primary benefit is tax deferral on withdrawals. This means that the widow can take distributions from the IRA without immediately incurring taxes on the amount withdrawn, allowing the funds to continue growing tax-deferred. This can be particularly beneficial for financial planning, as it provides the flexibility to withdraw funds at a later time when the overall tax situation might be more favorable.

While it might seem that full access to funds, exemption from estate tax, or increased contribution limits could play a role, they do not accurately describe the specific purpose and benefit of the marital deduction as it pertains to IRAs. The focus of the marital deduction is primarily on allowing tax-deferral opportunities for the surviving spouse, which helps in better management of inherited retirement funds.