Two retirement portfolios with the exact same $1,200,000 gross ending balance at death can deliver dramatically different after-tax wealth to your heirs depending on which tax wrappers hold those assets. Measuring legacy outcomes in gross pre-tax dollars ignores two of the sharpest tax-asymmetry provisions in the Internal Revenue Code: the SECURE Act 10-year distribution rule governing inherited pre-tax IRAs and the IRC Section 1014 Step-Up in Basis governing inherited taxable brokerage accounts.
Consider a 66-year-old couple holding $2,200,000 split across 50% Traditional 401(k), 20% Roth IRA, and 30% ($660,000) in a taxable brokerage account with a 35% cost basis—meaning 65% of the brokerage account represents unrealized long-term capital gains. If they spend down their taxable brokerage account first and bequeath $1,200,000 inside their Traditional 401(k) at death, their non-spouse beneficiaries must liquidate the entire inherited IRA within 10 years—typically overlapping with their heirs’ own peak career earning years. At a combined 35% federal and state marginal income tax rate, heirs surrender $420,000 in ordinary income taxes, netting just $780,000.
Now reverse the drawdown priority: fund living expenses primarily from the Traditional 401(k) while preserving the appreciated taxable brokerage account and Roth IRA until death. Under IRC Section 1014, the cost basis of inherited brokerage shares resets ("steps up") to fair market value on the decedent’s date of death. Every dollar of unrealized capital gain compounded over decades—potentially $780,000 or more of embedded gain—is permanently wiped clean, enabling heirs to liquidate the entire $1,200,000 brokerage and Roth estate with $0 in federal capital gains tax.
Generic bank calculators fail estate-conscious families because they report a single gross ending balance without tracking account-type composition or brokerage cost basis.
This template models a $2,200,000 portfolio featuring a 35% low-basis brokerage account alongside pre-tax and Roth buckets. Load the preset to track ending balances by account wrapper and maximize after-tax legacy value.