Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 3
And as I mentioned in a previous message on this thread, it becomes all the more important for us to do if this new law passes and the kids will have to draw down their inherited IRA over 5-10 years,

I'm haven't taken a close look at the proposed law, but I would make sure to see if the RMDs in that law apply to only traditional IRAs or to both traditional and Roth IRAs. Even if you convert to Roth, they may need to withdraw over that 5-10 year period.

since we would much rather they get the money than Uncle $am. Run your numbers, look at the data on hand.

As far as Roth v Traditional, since you are planning to leave some portion to your children, make sure you look at your tax bracket today compared to the best guess of their tax bracket down the road. Given enough time between now and then, would they choose to retire shortly after inheriting? Or perhaps take a sabbatical from work? That could significantly decrease their tax bracket.

And don't forget to consider simply withdrawing the funds from the traditional IRA and moving them into a taxable investment account rather than converting the money to a Roth. Since you are planning on not using the funds and leaving them to your children, the step up in basis they receive could be serve to make most of the inheritance tax-free to them. And invested in long-term growth stocks that pay little or no dividends, there could be little or no tax impact to you while you hold the investments.

Just trying to toss a few ideas out there.

--Peter
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.