The applicable exemption amount for federal estate tax in 2009 is $3.5 million. The figure was incorrect in today's column.

The old saying teaches us that only death and taxes are certain in life.

Questions about both — or a combination of the two — also are fairly common when it comes to readers of this column.

Consider the e-mail I received recently from Lloyd.

"What are the amounts of inheritance taxes and estate taxes on an (individual retirement account)?" Lloyd wrote. "I have heard 46 percent and 35 percent, respectively. I also understand that there isn't really any way to avoid these taxes as an IRA — because it is for an individual — is a separate entity and cannot be included in a trust."

Good question, Lloyd. For help with an answer, I contacted Preston Eichers, CPA with Hansen, Barnett & Maxwell in Salt Lake City.

Preston wrote in an e-mailed response that IRAs generally have designated beneficiaries.

"At the death of the IRA participant, the IRA generally transfers to the designated beneficiary and avoids probate," he wrote. "If the IRA does not have a designated beneficiary for some reason, then the IRA transfers to the estate of the beneficiary."

Preston wrote that he was not entirely clear on the meaning of Lloyd's question, but he had a few ideas that might clarify things.

"Is he asking the tax that would be paid by the estate or the tax to be paid by the beneficiary? Utah has no 'inheritance tax.' Utah tax law follows federal tax law, and since federal law changes have phased out the national inheritance tax, it has, therefore, eliminated Utah's inheritance tax after Dec. 31, 2004," Preston wrote.

"The IRA participant would have to have an estate in 2009 greater than $3.5 million for the estate to pay any federal estate tax, which would be taxed at 45 percent."

I wouldn't mind worrying about $3.5 million of my own being taxed at that rate, but I digress.

Preston wrote that a designated beneficiary has several choices when he or she is inheriting an IRA.

"The most common is the beneficiary can cash in the IRA and pay tax on the distribution," he wrote. "I presume that is the question from Lloyd. The amount of tax that is to be paid is determined by the amount of income taxed in the beneficiary's income tax return.

"So if the beneficiary is in the 25 percent federal income tax bracket and the 5 percent Utah tax bracket, then the beneficiary would pay tax on the distribution in the amount of 30 percent. The highest individual federal income tax rate (is) 35 percent. The beneficiary will not be subject to the 10 percent early withdrawal penalty, if the distribution occurs on or after the death of the IRA participant."

That seems fair, at least!

I hope this does answer your question, Lloyd, or at least gets you pointed in the right direction.

Preston offered advice on another tax question, too, and I'll tackle that one in next week's column.

Meanwhile, if you have a personal finance comment or question, send it to gkratz@desnews.com or to the Deseret News, P.O. Box 1257, Salt Lake City, UT 84110.