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Author: nml Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Estate Funds Date: 12/30/2013 7:00 PM
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Hey All,

Apologize if this question is better posted on another board.. if so point me to that area...

How are funds left for children handled....specific example (numbers made up)

I purchase $1000 of BRK.B stock in a R/O IRA
I purchase $1000 of BRK.B in a regular margin brokerage account.

In 25 years I die and each account is worth $25000 dollars.

When these accounts are left equally to my 2 children, what will be the basis of the proceeds when they eventually cash the stock in...

TIA

Mick
(just beginning to look at the specifics of estate planning...as currently only 55, employed, loaded with insurance and all kids out of the house, educated, married and pretty much on their own)
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Author: Raladic Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119776 of 121592
Subject: Re: Estate Funds Date: 12/30/2013 7:33 PM
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This is to the best of my knowledge:

Roth IRA: Tax free withdrawal of the $25000 within 5 years or via a spanned RMD over their lifetime, as your kids are not your spouse (so they can't take over the account the same way your spouse could)

Traditional IRA: $25000 as new cost basis, withdrawal rules like above for Roth, but since it's a tax deferred account, they still pay tax at withdrawal on all distributions

Taxable Account: $25000 is their new cost basis, tax will be due on gains from the new cost basis

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119777 of 121592
Subject: Re: Estate Funds Date: 12/30/2013 9:26 PM
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I purchase $1000 of BRK.B stock in a R/O IRA
I purchase $1000 of BRK.B in a regular margin brokerage account.

In 25 years I die and each account is worth $25000 dollars.

When these accounts are left equally to my 2 children, what will be the basis of the proceeds when they eventually cash the stock in...


I assume R/O means rollover?

The basis in the shares in your regular account is their FMV on the date of your death.

The basis of any item in any kind of IRA is irrelevant. (After-tax contributions to a traditional IRA are sometimes called basis in the IRA.) Assuming there's no after-tax money involved in your traditional IRAs, everything that comes out of the IRA will be taxed as ordinary income. Qualified distributions from a Roth IRA are tax-free to your heirs.

Basis: Pub 551
IRAs: Pub 590

Phil
Rule Your Retirement Home Fool

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