I ran across an interesting way to beat taxes on an inheritance at the moneypaper website www.moneypaper.com/nesandviews/pr030599htmlto paraphrase the article: Suppose you pay grandma when she babysits, up to $2000 a year. She opens a Roth IRA with junior as a beneficiary. If she lives 15 yrs, the $30000 invested at a tame 10% (their figures, we Fools could easily double the return) would be worth 112,000. Upon her death, junior inherits the IRA tax free, then begins to take out the mandatory withdrawls, based on his life expectancy, 1/60th would be approx $1800 the first year. If the Roth continues to invest it will be worth $2.2 million, and requires junior to take a withdrawl of $220,000 at age 70. Assuming only 10% growth... Please read the complete article, but this seems like an utterly Foolish way to insure your children's retirement. Can anyone see any downside to this?
Possibly. Grandma will have to pay approximately 15% in self employment taxes or about $300. But, if you can get a child care credit in return. The net effect may be negligible.Bob
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