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The Hidden Power of “Income in Respect of a Decedent” (IRD)

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Kantrowitz, Goldhamer, Graifman, Perlmutter & Carballo, P.C.

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Written/Reviewed By:

Barry S. Kantrowitz, Esq.

Last Updated: May 29, 2026

Read Time: 3 mins

Our friends at DP Legal Solutions discuss how when planning your estate, most people focus on the “stepped-up basis” rule, which allows heirs to inherit assets like real estate or stocks without paying capital gains tax on the previous growth. However, many clients are surprised to learn that retirement accounts do not follow this rule. A trust administration lawyer can help you understand these distinctions and develop strategies to manage the tax burden of Income in Respect of a Decedent. Contact an experienced lawyer today to learn how to manage the tax burden of “Income in Respect of a Decedent” (IRD).

What Exactly is IRD?

Income in Respect of a Decedent (IRD) refers to income that the deceased person was entitled to receive but had not yet collected before their death. For most people, the largest source of IRD is their traditional IRA or 401(k). Because these accounts were funded with pre-tax dollars, the IRS still wants its cut of the income tax when those funds are eventually distributed.

Unlike a house, which gets a “stepped-up” value to the current market price upon death, retirement assets retain their “zero basis” status. This means every dollar your children or spouse withdraw from a traditional inherited IRA is generally treated as taxable ordinary income.

The IRD Planning Challenge

The challenge with IRD is that it can create a massive tax bill at the exact moment your heirs are trying to manage your estate. If you leave a $1 million IRA to a child who is already in a high tax bracket, and they are forced to liquidate that account over ten years due to the SECURE Act, a significant portion of that legacy could vanish into taxes.

Strategies to Mitigate the IRD Hit

We look for ways to offset the impact of IRD:

Charitable Giving: If you are charitably inclined, naming a 501(c)(3) organization as the beneficiary of your IRA is often the smartest move. Since charities are tax-exempt, they receive 100% of the funds, whereas a human heir might only receive 60% after taxes.
Roth Conversions: Converting a traditional IRA to a Roth IRA during your lifetime allows you to pay the tax now so your heirs can receive tax-free distributions later.
Life Insurance: Some clients use life insurance to provide heirs with a tax-free “pot of money” specifically intended to pay the income taxes due on the inherited IRA.

Understanding how IRD works is the key to ensuring your family keeps the wealth you worked so hard to build. To create a tax-efficient distribution plan, contact an experienced lawyer today.

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   LWelsh 
 30 days ago
 
 
 Trustindex verifies that the original source of the review is Google. Clever and efficient.
  
 
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   Kenny Perlow 
 51 days ago
 
 
 Trustindex verifies that the original source of the review is Google. KGG Law, and Barry Kantrowitz in particular, set the bar high for what a thorough, practical, strategic, compassionate and smart lawyer can be. Everything about Barry's advice and representation was exemplary and the stress mitigation that resulted was invaluable. On top of that, the ultimate result Barry achieved was beyond what was reasonable to expect and we are forever grateful. Often, people say that you hire a lawyer to prevent a problem. Sometimes, unfortunately, you need an attorney to solve a problem and I could not recommend Barry and his firm any more highly in that regard.
  
 
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   Aliza Ali 
 115 days ago
 
 
 Trustindex verifies that the original source of the review is Google. My dad had a great experience with this law firm. From the very beginning, the team was professional, knowledgeable, and always willing to answer our questions. They kept us informed throughout the entire process and made what could have been a very stressful situation much easier to handle. We truly appreciated their dedication, honesty, and hard work. Thanks to their support, my dad felt confident every step of the way. We are very grateful for everything they did and would highly recommend this firm to anyone looking for reliable legal representation.
  
 
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   Jana Montero 
 118 days ago
 
 
 Trustindex verifies that the original source of the review is Google. I had a wonderful experience working with Sam Smith. He was very responsive, thorough, and easy to work with from start to finish. He walked me through everything clearly and made what started as a very stressful situation for me into something completely manageable. I would not hesitate to recommend him and the firm!
  
 
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   Mike Sakmann 
 124 days ago
 
 
 Trustindex verifies that the original source of the review is Google. I sought legal advice regarding an employment matter and had an excellent experience working with Sam Smith, Esq. at KGG Law. Sam was thorough, attentive, and took the time to listen carefully to my concerns before providing clear, thoughtful guidance. I appreciated the professionalism and care shown throughout the process, and I would confidently recommend KGG Law to anyone in need of legal assistance.
  
 
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   Liz Hecker 
 130 days ago
 
 
 Trustindex verifies that the original source of the review is Google. I can't say enough about this firm. They manage to comfort you during the whole legal process while staying professional and doing what is right. I would recommend them to anyone and also hire them again if I need legal help.
  
 
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   Brandy Miller 
 153 days ago
 
 
 Trustindex verifies that the original source of the review is Google. Kate is the best. She helped me very quickly, and was very attentive with all of my needs. So thankful for her
  
 
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   Mike Greenspan 
 166 days ago
 
 
 Trustindex verifies that the original source of the review is Google. Kate Carballo is a dedicated, passionate, and creative attorney whom I had the pleasure to lecture with at a state trial lawyer's conference. Kate's lecture demonstrated how she uses her innovative and "out-of-the-box thinking" to achieve outstanding results for her injured clients. That Kate is certified by the Supreme Court of New Jersey as a civil trial attorney is a testament to her skills, experience and commitment to excellence.
  
 
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   Jonathan Sampson 
 173 days ago
 
 
 Trustindex verifies that the original source of the review is Google. Was referred to KGG law by a friend and could not have asked for better legal representation. They walked me through every step of the process after my accident and began every call with “ how are you feeling” which was just one example of how much they care about their clients. They handled my case very efficiently, professionally and courteously. My attorney Kate Carballo was a rock star! So clearly experienced, she consistently made me feel at ease with the process. Highly recommend
  
 
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   Vinnie Kung 
 176 days ago
 
 
 Trustindex verifies that the original source of the review is Google. We had a great experience with the team at KGG Law. While it was a traumatic time for our family, they made it very easy for us and explained all of our options. They even performed due diligence to make sure that after our settlement, there would be no further issues which I think is even more important than the settlement itself. Thank you!

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The Hidden Power of “Income in Respect of a Decedent” (IRD)

What Exactly is IRD?

The IRD Planning Challenge

Strategies to Mitigate the IRD Hit

Why Trust Us?

Rockland County, New York

Bergen County, New Jersey