Smart Money With Sam

Your heirs' tax bracket could shrink what you leave them.

Most people don't realize that the type of retirement account their heirs inherit matters just as much as the balance inside it.

Since the SECURE Act, most non-spouse beneficiaries have 10 years to empty an inherited account. That deadline applies to both traditional and Roth IRAs. But what happens inside that window is very different depending on which type they receive.

With an inherited traditional IRA, every dollar withdrawn is taxed as ordinary income in the heir's bracket. If they're in their peak earning years when they inherit, that money could be taxed at a higher rate than you ever paid on it.

With an inherited Roth IRA, qualifying withdrawals come out tax-free. The 10-year rule still applies, but it's a distribution deadline, not a tax event.

IRS final regulations also clarified that if you pass after your required beginning date, your heirs may owe annual distributions throughout that 10-year window, not just a lump sum at the end. That rule only applies to traditional IRAs. Roth owners never have a required beginning date.

This is exactly why Roth conversions come up in legacy planning. Converting during your lifetime shifts the tax burden from your heirs' bracket to yours, at a time when you may have more control over where it lands.

Every dollar you leave behind deserves that kind of planning.

All content presented is for educational purposes only and should not be construed as a solicitation or offer to sell securities or provide investment, tax, or legal advice. All examples are hypothetical, for illustrative purposes only, and are merely arithmetic calculations. They are not representative of the performance of any type of investment, security, or strategy offered by the firm. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Hypothetical returns do not reflect actual trading and may not be indicative of the performance of any specific investment. They are based on assumptions and estimates that may not be accurate or applicable to your individual situation. Always consult with a qualified financial advisor before making any investment decisions.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC's Investment Adviser Public Disclosure website, www.adviserinfo.sec.gov.

Foundation Wealth Partners is a financial advisor serving achievers and pre-retirees ages 45 to 65.

Your income stays the same. Your tax bill doesn't.

When one spouse passes away, most of the household income keeps flowing. The pension. Social Security. IRA withdrawals. But the tax bracket? That can shift in a way most couples never planned for.

In 2026, the 22% bracket kicks in at $100,800 for married couples filing jointly. For a single filer, that same bracket starts at just $50,400. Same threshold, cut in half.

A surviving spouse with the exact same income can find themselves pushed into a higher marginal rate simply because their filing status changed. That's the widow's tax penalty.

There is a brief window called Qualifying Surviving Spouse status that may preserve the joint filing bracket for a year or two if a dependent child is involved. But most surviving spouses eventually file as Single, and that transition can carry a meaningful tax cost.

This is one reason tax-free income sources matter more than many people realize. A Roth withdrawal doesn't increase your taxable income the way a traditional IRA distribution does. Having that flexibility in place before a filing-status change happens could make a real difference later.

What's right for your situation depends on your full income picture, account mix, and current tax law. Worth planning for now, not figuring out when the stakes are highest.

All content presented is for educational purposes only and should not be construed as a solicitation or offer to sell securities or provide investment, tax, or legal advice. All examples are hypothetical, for illustrative purposes only, and are merely arithmetic calculations. They are not representative of the performance of any type of investment, security, or strategy offered by the firm. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Hypothetical returns do not reflect actual trading and may not be indicative of the performance of any specific investment. They are based on assumptions and estimates that may not be accurate or applicable to your individual situation. Always consult with a qualified financial advisor before making any investment decisions.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC's Investment Adviser Public Disclosure website, www.adviserinfo.sec.gov.

Foundation Wealth Partners is a financial advisor serving pre-retirees and high-achieving professionals.

Some of the most financially prepared people I've met with were still eaking up at 3 a.m. convinced they're going to end up broke. And when you dig into it, the fear isn't really about a balance hitting zero.

They fear losing independence. It's about losing the freedom to make choices. About becoming a burden to the people they've spent their whole lives protecting.

That kind of fear doesn't get fixed by running a projection over and over.

But two things on the planning side can change how it sits. First, a floor: income that covers the essentials regardless of market conditions, so your portfolio stops feeling like a lifeline that you can't afford to lose and starts feeling like opportunity. Second, real clarity on what enough actually funds, not just a number, but the specific life you want it to support month to month.

Those two things won't make the fear disappear. But for a lot of people, having them in place changes everything.