WSJ makes it sound like the sky is falling. 
That accelerated distribution of inherited IRAs would be a problem for a very, very small handful of folks.
Where do you all go for tax optimization advice when it comes to managing your money and estates? What kind of professional do you use, if you use one?
Iâve always handled my own investing and donât need assistance with the mechanics of that.
I have wills and trusts set up but those lawyers only help with the documents not tax strategy.
It would probably be beneficial for me to consult with someone who can make personalized suggestions on our unique circumstances including eventual RMDs, any sheltering for future generations, when to take SS, etc.
@shawbridge â Can you explain your comment about Roths above?
Currently, I can use my life expectancy to take distributions from an inherited non-spousal IRA and Roth, with the tIRA being taxed and the Roth not taxed. Both accounts will be subject to the ten year distribution requirement, but wonât the Roth distributions remain untaxed?
Thanks!
This happens all the time, all you can do is adjust your plans.
In particular, if a certain party ever regains control of POTUS and both houses, expect the federal estate tax exclusion to be greatly reduced from the current $11 million or so, possibly all the way back to the original $1 million. I would wager most of us wouldnât pay federal estate tax with an $11 million exclusion, at $1 million, many of us will. Wouldnât be surprised to see stepped-up basis get killed either.
The highest federal estate tax rate, which kicks in at $1 mil in taxable estate value, is 40%, which is higher than any current tax brackets. So if you have a large estate there is still value to letting your heirs inherit your IRA.
Sorry, this is nonsense. They are just as rich in person. They still have $500,000 in assets. So they have to pay a little extra in taxes by doubling up distributions, this will be far less than the 50% your income is âtaxedâ by the financial aid formulas. And thatâs assuming your kid makes it into one of the tiny fraction of schools that actually meets need without loans.
The SECURE Act has not been passed by both houses of Congress and signed by the president, right? With a good chunk of my assets in a traditional IRA and my 71st birthday in June, it means a lot to me! On the other hand, unlike many of you, I will never have to worry about the estate tax unless I win Lotto, and of course I never buy tickets.
It passed the House almost unanimously, it has not passed the Senate yet, but if/when it does, the president is expected to sign it, AFAIK.
https://www.estateexec.com/Docs/General_Statistics indicates that only 11% of estates in the US have more than $1 million, of which only 3% have more than $5 million (and very few of which need to pay federal estate tax) with the median estate being in the range of $50-$250k (other sources suggest $69k â and there are presumably people who die without leaving any estate worth mentioning). So if it is true that âmany of us willâ pay federal estate tax if it were at the $1 million level, that suggests a forum demographic at the high end of wealth in the US.
The diff is that Rothâs are not taxed when the beneficiary withdraws the funds, whatever schedule it might be (10 years or lifetime).
Generally agree with this, but potentially bumping kids into a 50% tax bracket â wow-za.
Correct. But this bill passed teh House by a huge margin so has bipartisan support. The Senate is expected to pass it as well. (The investment houses love it since they can add annuities into 401kâsâŠ)
Exactly. Son is married and living in NYC. His spouse also works. They are likely near/at the 50% marginal tax rate. Since my retirement tax rate is much lower, it makes sense for me to take down more of the IRA (than the RMD requires) so I can pay the tax on it now (at say, 22%), and roll into an Roth. Or just buy equities with the excess (Vanguard Total Stock Market which is extremely tax efficient) which Son will eventually receive with stepped up basis. (Iâll have to go to Plan C when they change that ruleâŠ)
https://www.inc.com/peter-cohan/will-10-million-make-you-happier-harvard-says-yes-if-you-make-it-yourself-give-it-away.html suggests that peopleâs happiness is better with earned money rather than inherited money.
I donât think there is any question that the demographics of people participating in this thread do not reflect the country as a whole.
If you can handle your own investing, you should be able to handle your own tax optimization. In fact, a big part of managing money is to maximize after-tax wealth, so taxes should be part of the analysis all along,
@CT1417, I thought one of the big benefits of the Roth was the Stretch option. That is now going away. I think what @notrichenough might say is that you also canât count on Congress to go back and try to tax Roth distributions when they feel like they need $$.
@bluebayou, I agree. However, to convert, Iâd have to pay the tax at the highest rates today. So, I doubt conversion would be worth it without the ability to stretch.
@doschicos, when I worked for a wealthy familyâs office on Wall Street, I worked with superb tax folks at one of the Big 4 who helped the company and the family optimize. When I left there and started my own company, I asked a number of people to see if I could find a proactive tax person who would suggest ways to optimize and solve problems but who was not at a big firm. Several people suggested the same guy, who was a name partner at a smaller firm that specialized in dealing with entrepreneurs. I engaged him. He suggested a structure that I think has saved at least $10K per year for 25 years plus enabled me to set up the DB plan and hence deferred lots of taxes for many years. His firm does my business and personal taxes and so pays attention to tax optimization both short-term and for estate planning. In addition, I engaged a financial advisor who is holistic and pays a lot of attention to tax optimization. She is smart and works hard to involve my wife and kids. This is valuable to us, but also to her as she is much more likely to retain them as clients after I die if she has relationships with them. I also read a lot and will ask both for comments about things I have read. I brought in a lawyer to create a trust structure that reflected my situation, and both the FA and the accounting firm cooperate with him. In each case, I spent a fair bit of time looking for really capable advisors. I hope this is helpful.
âWhere do you all go for tax optimization advice when it comes to managing your money and estates? What kind of professional do you use, if you use one?â
An attorney (or CPA) who specializes in estate taxation. One thing a CPA cannot do is to provide legal advice.
Well, H and I had the big discussion last night. We have decided that retirement will happen in January 2021. Were not telling anyone yet, though.
Re: the opinion in the *Wall Street Journal *
Looks like it was written by someone trying to build a dynastic aristocracy of inherited wealth complaining because s/he may have to make some changes to the plan, even though his/her heirs would still get a lot of inherited money under the changed laws even if s/he made no change.
Lets not forget that the push to change IRA rules began when it was revealed that Mitt Romney had over 100 MILLION in an IRA.
Passing on wealth to multiple generations is NOT what IRAâs were meant to do !!!
âWhere do you all go for tax optimization adviceâ - As DH was approaching retirement last year, we decided to go with a fee-only financial planner. DH had been doing a fine job with our big picture finances, but he needed an adviser/sounding board). Our next session in August will discuss tax optimization
Note - Over the prior 10 years we had attended 4(?) retirement planning 2-night courses, including free follow-up personalized sessions. It was good for helping us get our ducks in a row (it was what prompted me to start doing monthly money âoutflowâ tracking mentioned a few days ago). But we never clicked with any of them, and DH preferred the fee-only planner rules . Itâs not the right answer for everyone, and we are not 100% sure weâll stay with them forever.
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Heâs an author/co-author (with Ben Stein) and wealth management advisor.
http://phildemuth.com/wp-content/uploads/2019/02/front-books-Our-Latest-Book.jpg
Yay, @FallGirl! At least we know, even though you arenât telling anyone.?