The three ghosts of tax planning: Why advisors cannot afford to wait

Halloween is a great time for ghost stories. But the ones I want advisors talking about won’t disappear when the decorations come down and the calendar flips to November.

They’re what I call the “Three Ghosts of Tax Planning,” and they’re one of my favorite frameworks for explaining why tax planning cannot wait: the problem clients can see today, the one coming around the corner and the one their children may inherit. Advisors need to plan for all three.

The present ghost: Complacency

Tax rates are historically low, and the brackets are wide. This combination breeds complacency. Many clients are also sitting in what I call an income valley, between retirement and the start of Social Security and required minimum distributions, or RMDs. Taxes simply are not a pressing concern yet, which is exactly when the planning should be happening, and exactly when most people do nothing.

A low tax bill can feel like confirmation that everything is working, but it may also signal a temporary opportunity. The question becomes, “Is today’s rate lower than the rates a client, surviving spouse, or their children might face later?” Waiting until taxes become painful may mean the opportunity has passed.

The near future ghost: Tax acceleration

Large traditional IRA balances eventually force taxable income through RMDs, whether the client needs the money or not. A $4 million IRA at age 80 requires an RMD of close to $200,000. Add Social Security, and that can push a couple from the 22% bracket into the 24% bracket and over the first IRMAA threshold.

Then there is the widow’s penalty. Consider a couple with $275,000 of taxable income. If one spouse dies and the survivor’s taxable income stays the same, moving from married filing jointly to single pushes their top federal rate from 24% to 35% under 2026 brackets, and their IRMAA surcharge jumps to a higher tier. Same income, higher brackets. This all adds up to an addition (or an acceleration) of taxes that may not have been anticipated or planned for. This is not a hypothetical risk, and these planning conversations should happen while both spouses can participate.

The future legacy ghost: Less for the family and decades of tax policy risk

Tax law will keep changing, and no one can predict exactly how. That uncertainty can compound over decades and materially affect what a family ultimately keeps.

The SECURE Act adds to it. Most non-spouse beneficiaries must now empty an inherited IRA within 10 years, often during their peak earning years and higher tax brackets. Take a $2 million IRA left to a married child with $300,000 of taxable income, solidly in the 24% bracket. Spread evenly over 10 years, the distributions push the child into the 32% bracket every year for a decade, adding more than $550,000 in federal tax. Wait until year 10, and the account pushes them into the 37% bracket. Roth conversions by the parent while in the 22% or 24% bracket would have produced a different outcome, leaving the child a Roth IRA they can withdraw tax-free. Plus, estate and inheritance taxes introduce another layer.

The point is not to predict every future tax change. It is to stop treating today’s tax bill as the entire planning problem. The goal is the lowest lifetime tax bill, not the lowest bill this year. That means modeling taxes across a client’s lifetime and pulling income forward while they are in lower brackets, before RMDs, the loss of a spouse, or an inheritance pushes it into higher ones.

It is simple tax arbitrage, but it requires modeling, planning, and an advisor who knows what they are doing. The clients best positioned to pay taxes at favorable lifetime rates are the ones whose advisors planned for all three ghosts, not just the one standing in front of them right now.

Debra Taylor is the managing partner and chief tax strategist of Carson Group and Carson Wealth location in Franklin Lakes, a full-service wealth management firm located in New Jersey.