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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.


make sure you look at your tax bracket today compared to the best guess of their tax bracket down the road.

I am assuming that it applies to both, but the only one of concern are the Traditional IRAs since taking the money out of the Roths would not impact their taxes. We are already planning to make conversions up to the 24% tax bracket because if we don't the RMDs at 70.5 would place us in the 28% tax bracket based on the 2017 brackets. And this assumes we are both still alive at that time and can do MFJ. Our RMD tax rate is worse if only one of us is living. Eldest is already in the 24% bracket, granted filing single but with no girlfriend in sight. If something happens to us early on and we don't get to spend down the IRAs, having to take the inherited IRAs over 5-10 years would put his taxes well over 24%. No idea where Youngest is going to land on the tax scale as he is not yet out of college. Will not likely be anywhere near Eldest's tax bracket because of the different majors. With the difference in tax brackets taken into consideration, if this law passes we will likely change the ratios of the IRA inheritance to max Eldest out on the Roths and give Youngest more of the Traditional, making up for the tax difference with more taxable funds or simply more total IRA money. That will require changes over the years but it is easy enough to change the beneficiaries on an IRA, unlike changing a will or a trust.

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.

Appreciate the ideas. It's not so much that we are not intending to use some of the funds, but that if we get hit by a bus they will inherit it all. Like a chess player I try to plan three moves ahead. But I don't see the point of putting our funds into a taxable account rather than a Roth after paying taxes on it. There will be no taxes on distributions from the Roth for us or them, and when inherited they will at least have 5-10 years of continued tax free appreciation in the inherited Roth. IMO there is a greater chance that step up in basis on death will be eliminated and inherited assets will inherit the original owners basis.

Thanks for your post.

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