It seems that financial planning for families with trust fund babies and/or large expected inheritances is entirely different from those ones with no one to rely on except themselves, so there is little use in comparing the notes. Every family is different. We make annual gifts to our children because we support our parents (as well as other family members), so we want to keep it fair and balanced. Unlike many posters on BH forum, we were confident to choose the older kid as a legal guardian for the minor sibling, senior family members, as well as the entire estate at only 18 years old. So we are obviously not concerned with our children mismanaging the money we gift them. If at some point they start behaving irresponsibly, we may reconsider.
@mycupoftea
Once you start yearly gifting, you really cannot stop. It will cause a family revolution if you found the kid or his spouse who receive the gift become irresponsible. Your perception and theirs maybe different. Nevertheless, its your money, do what you want.
@artloversplus āOnce you start yearly gifting, you really cannot stop. It will cause a family revolution if you found the kid who receives the gift become irresponsibleā This is really funny. Even though they have full control, the kids refuse to touch the assets, which they still consider to be ours. They ask us every year about our preferred investment type, and give us access to these accounts (their decision - not ours). One kid is now married, and the couple did not allow us to finance their wedding. We practically begged them to accept the money afterwards as a wedding gift. As I said, all families are different.
@mycupoftea
At the minimum, they will lose the stepup basis(if it were not being repealed) on an outright gift. You can let him be the trustee to a separate account under another your living trust setup just for him, with a separate EIN.
@artloversplus - I disagree with your comment that once one starts gifting it canāt be stopped. My intent in gifting is very specific - use for grad school. I have told ds a range with a max that I would be willing to contribute. Iām giving some now so that the max can be achieved without any necessary filings. If he doesnāt choose to attend grad school, Iāll stop gifting. I would only gift through grad school attendance.
I only have one ds so there isnāt any issue of unfairness between siblings.
I also disagree that gifting is something that canāt be stopped once it starts. We do it because we want to and feel it helps our kids. We also have the assets in hand to be able to gift comfortably at this time. If at some point our financial situation changes or we chose to stop, I donāt believe our S will be concerned. We will have to support D until sheās able to support herselfāhopefully some day.
@artloversplus all good points. Trust me, greater minds than mine (not a very high bar there ?) have coordinated our financial strategy. Weāre fortunate to be able to gift to the kiddos with no strings attached. Both are in committed relationships with SOs we love as family. Yes, things can go wrong on many fronts. But at the end of the day, we believe this is a good use of money we wonāt need.
@Dave_N, I used to work for a 401k third party administrator who added a 1% trust fee, too. Employer paid plan admin fees separately. It was outrageous. Even the disclosure rules mandate telling participants about the fees, it is still sufficiently opaque that most people have no idea.
āTracking ALL expenses is really really importantā _ Very true.
For the past 7 years or so weāve done it as a very āoutflow analysisā ā¦ 1) VISA (a biggie, especially since we do utility autopays etc) + 2) checking account withdrawals (incl autopays) + 3) cash (less and less as time goes by) . Then we review our year end VISA by-category statement to get an idea of category splitsā¦ It is very useful to us, and it is very simple ā¦ just a 10 minute task (including entry of subtotals into spreadsheet) after I do monthly checkbook balancing. More detailed tracking could be even more meaningful, but itās too much work to trust that Iād do it faithfully. (After retirement, Iāll do more careful tracking.)
^^all the more reason to convert tIRAās to Roths while you can.
Care to elaborate? I canāt open the article.
Do you mean the inherited IRA rule changes?
https://www.cnbc.com/2019/07/09/the-secure-act-reduces-incentive-to-reinvest-401k-withdrawals.html
IMO, IRAs are not supposed to be estate planning tools. Thatās why we will try to spend down ours.
The big change from SECURE that Iāve read from another article about the act is that inherited IRAs from non-spouses will have to be totally distributed within 10 years. Currently, the person who inherits can distribute as if the person were still alive and it can be over a much longer period than 10 years. I just searched online for SECURE act and read a bit about it. I couldnāt view the WSJ article beyond the paywall either.
As others have said, it is not good to rely upon an IRA as an estate planning tool.
the big change BB is the 10-year distributions to non-spousal heirs. If our kids are in the middle of their careers, the taxes dues could be huge, up to 50% in some states.
@shawbridge
I canāt open the article either, I am not going to subscribe to WSJ just to read up one article. I thought the secure act. did provide a lot of benefits to the IRA holders, except it does not allow the inherited IRA to be paid out based on life expectancy of the beneficiaray.
Yes, it allows people to contribute to their IRA through age 72 instead of 70, among other things. There are a lot of other articles about the SECURE Act that folks can search for and read online.
Yes, apparently the new 10 year distribution rule is what some are unhappy about. If that is the only problem, it is not going to be MY problem. 
That said, we plan on spending our retirement accounts down. The future heirs will have to deal with our stock portfolio and RE - if any.
2 year later for RMDs to begin is nice, as long as they adjust the expected lifetime upward. The RMD percentages get pretty high by age 80.
Personally, my offspring and I would benefit from the Stretch IRA staying in place. However, Iām not sure it is in keeping with the original intent of IRAs which were designed to fund oneās own retirement not as an estate planning tool.
I donāt think this will affect me as much, though I will reanalyze the decision not to convert to a Roth. Given that Rothās get the same changes, I donā t know if this changes the analysis at all.
As a small business owner, Iāve put quite a bit in a defined benefit plan that was originally a 415(i) and then a 412(i) (I think). I was able to contribute up to $200K a year. Then, I was about to hit the cap on size of the DB Plan (no one had ever told me there was a cap) and I rolled it all into a 401(k). Iāve had good returns in the investments Iāve made in the DB Plan and 401k. Iāve done pretty good estate planning but Massachusetts considers the 401k part of my estate ā and starts taxing it at the first dollar (if the estate exceeds $1 MM)ā¦ I figure I will have to take the RMDs and pay high rates of taxes. Deferring the start of RMDs for two years will be good. I wonder if the right move becomes taking the RMDs and buying equities for capital appreciation and not income so I am bequeathing to my kids stocks from which they can benefit from a step-up in basis (assuming that doesnāt also get taken away by retroactive changes in rules.
I think the only thing I could sensibly do is move out of Massachusetts and avoid the 5.1% tax and the estate tax (progressive: https://smartasset.com/estate-planning/massachusetts-estate-tax). ShawWife is not on board, at least at the moment. I never really discuss tax stuff with her (her eyes quickly glaze over if I do), but I did point out that we could pay the mortgage on a nice place in Florida from avoided MA tax. Sheās not ready for it. Maybe when I show her how much extra we will be paying on the 401k? Maybe a different state?