Bogleheads Brain Trust-
Elderly couple (late 80s/early 90s) is in the 22% tax bracket. They have significant (7 figure) assets in Traditional IRAs with no basis. They live largely on pension income/social security and really don't touch the IRAs. They want to leave the entire amount, when they both pass, to their nephew (currently aged 59) who is married with 3 children (children in their early 20s). Nephew and wife are in the highest FED tax bracket and will be for the foreseeable future.
When the nephew inherits the IRAs, he'll have to empty the IRAs within 10 years under current tax law and will owe significant taxes on the annual withdrawals (35% FED).
What are some thoughts on how to minimize the tax bite for the nephew when he (unfortunately eventually) inherits these IRAs?
Initially, my thoughts are that the elderly couple should both gift as much as they can to the nephew, his wife, (and perhaps the nephew's children who will inherit the nephew's money when the nephew and his wife die) every year while they are alive for starters? The elderly couple should each gift $18Kx 2 to the nephew, nephew's wife, nephew's kids? Further, they should consider taking distributions from their Traditional IRAs to bring their gross income up to the 24% tax bracket and distribute that money as well while they are alive, filling out a gift tax return for any amounts over the individual annual gifting $18K exclusion limit OR if they don't want to gift that much and keep control of their money, take that amount up to the 24% tax bracket and convert it to a Roth IRA?
Beyond doing the above.........?
Elderly couple (late 80s/early 90s) is in the 22% tax bracket. They have significant (7 figure) assets in Traditional IRAs with no basis. They live largely on pension income/social security and really don't touch the IRAs. They want to leave the entire amount, when they both pass, to their nephew (currently aged 59) who is married with 3 children (children in their early 20s). Nephew and wife are in the highest FED tax bracket and will be for the foreseeable future.
When the nephew inherits the IRAs, he'll have to empty the IRAs within 10 years under current tax law and will owe significant taxes on the annual withdrawals (35% FED).
What are some thoughts on how to minimize the tax bite for the nephew when he (unfortunately eventually) inherits these IRAs?
Initially, my thoughts are that the elderly couple should both gift as much as they can to the nephew, his wife, (and perhaps the nephew's children who will inherit the nephew's money when the nephew and his wife die) every year while they are alive for starters? The elderly couple should each gift $18Kx 2 to the nephew, nephew's wife, nephew's kids? Further, they should consider taking distributions from their Traditional IRAs to bring their gross income up to the 24% tax bracket and distribute that money as well while they are alive, filling out a gift tax return for any amounts over the individual annual gifting $18K exclusion limit OR if they don't want to gift that much and keep control of their money, take that amount up to the 24% tax bracket and convert it to a Roth IRA?
Beyond doing the above.........?
Statistics: Posted by ualdriver — Tue Sep 24, 2024 4:05 pm — Replies 8 — Views 284