Pension and profit-sharing plan assets, IRAs, regular annuities, and unpaid installment payments are classified at death as income in respect of a decedent (IRD). To the extent a deceased taxpayer was entitled to receive income that was not included in his or her taxable income in the year of death, IRD income is subject to estate taxation to the decedent and income taxation to the beneficiary. Although an income tax deduction is available for any estate taxes due on the IRD, estate and income taxes due at marginal rates of up to 47 percent and 35 percent (2005), respectively, can still deplete much of the IRD asset's value that had been accumulated.
Because of their unique tax advantages, IRD asset accumulation vehicles will most likely constitute an increasing percentage of the taxable estates of future generations.
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