Q: If I gift to my heirs, which accounts should I gift from to reduce taxes after I die? Tax deferred, Roth or savings?

A: Funds coming out of a traditional (non-Roth) IRA or 401k are taxable whether taken out during life or when withdrawn after death. If all of your beneficiaries are natural persons then they will be required to make withdrawals from the traditional/taxable IRAs that you leave to them on a specified schedule, and those withdrawals will be taxable when withdrawn but not before. It will be up to THEM to time their withdrawals wisely to minimize taxes. If they take the money out all at once, then it will be taxable to them all at once, possibly pushing them into higher tax brackets and increasing the overall tax burden.

Withdrawals from inherited Roth accounts are generally not taxable (subject to a 5-year holding period, which I assume is already satisfied) in your hands or in their hands.

If you plan on leaving anything to charity, then make it the traditional IRAs because charities that inherit traditional (taxable) IRAs escape taxes altogether. Leave the tax-free Roth and regular savings (non IRA) accounts to the natural person beneficiaries.

A: When considering gifting to your heirs to reduce taxes after your death, you should be aware of the different tax treatments for each type of account. Distributions from tax-deferred accounts, like traditional IRAs, are taxable to the recipient, whereas Roth IRAs offer tax-free distributions if certain conditions are met. Gifting assets from a savings account may be subject to gift tax rules, but are not taxable as income to the recipient.

Keep in mind that there is an annual gift tax exclusion amount and a lifetime estate and gift tax exemption, which should be considered in your estate planning. Consulting with a tax advisor or an estate planning attorney can help tailor a strategy to your specific circumstances and goals, considering the potential future tax implications for your heirs and any changes in the tax law.