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Question about transferring funds near date of death
Old 04-17-2016, 07:40 PM   #1
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Question about transferring funds near date of death

My father is 90 and has been in a hospice facility for two and a half months. Heís been declining and has now entered a phase close to the end. I am his POA for his Traditional IRA and his bank account. My sister and I are the beneficiaries of his IRA and his POD (Payable on Death) bank account.

I have been withdrawing from his IRA to cover his hospice facility costs and a little more to his offset his taxable income with his expenses. Iím ball-parking his taxable income to be zero.

I was talking to my sister and BIL about how to manage an inherited IRA, just so they know where we stand and what to expect. We all understand the situation and know whatís coming so this is not morbid or uncomfortable.

My sister and BIL are in the 33% tax bracket (as Iíve read here, thatís a nice problem to have). They were asking if I could withdraw more from Dadís IRA before he dies so that itís taxed at my Dadís rate instead of their rate. Iíve done a quick estimation in a tax return program and I could withdraw another $36,000 to fill Dadís 15% tax bracket.

Hereís my hesitation in doing this - I takes a few days to cash out an investment and transfer the money to his bank account. His IRA is at Wells Fargo. The last time I did a transfer his investments were sold the next day after my call but then it took a few days to get to his bank.

Here's my question - What happens if he dies before it gets to his bank account? Will it still be his IRA withdrawl? What happens if it is deposited to his bank account after his death?

Please donít think this is morbid to ask about these things. My sister and BIL wanted to know if this can be done and I worry about things getting hung up in limbo if he dies while the transfer is in process.

He condition is very poor. We expected him to pass last week and I saw him today and he's kind of stabilized. He's getting comfort care only. The hospice facility is wonderful. When he was able to communicate he talked about being ready to go for a long time.

Iíll be calling Wells Fargo to ask about this tomorrow morning, but this forum has much smarter, more experienced folks.
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Old 04-17-2016, 08:10 PM   #2
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Yes, it would still be his money.

I think it is a good idea to zero out the IRA before touching the taxable account if the heirs are in higher tax brackets.
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Old 04-17-2016, 08:59 PM   #3
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Another possibility: convert all or part of the tIRA to Roth immediately, but only after considering the tax bite. You cannot convert tIRA to Roth after the tIRA is inherited.
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Old 04-17-2016, 09:31 PM   #4
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I would do that $36,000 and perhaps more if you and your siblings pay more than 25%.
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Old 04-17-2016, 10:34 PM   #5
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Another possibility: convert all or part of the tIRA to Roth immediately, but only after considering the tax bite. You cannot convert tIRA to Roth after the tIRA is inherited.
Excellent idea! My sister and I are equal beneficiaries of the tIRA. I will call tomorrow and see if that can be extended to a new Roth. Dad is beyond signing anything to designate beneficiaries but I am POA, so maybe I can do it.

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I would do that $36,000 and perhaps more if you and your siblings pay more than 25%.
DH and I are in 15% and sister and BIL are in the 33% bracket. We are the only beneficiaries of the tIRA.

Thanks so much for responding. I knew this was the place to ask questions.
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Old 04-17-2016, 10:35 PM   #6
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Another possibility: convert all or part of the tIRA to Roth immediately, but only after considering the tax bite. You cannot convert tIRA to Roth after the tIRA is inherited.
why?
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Question about transferring funds near date of death
Old 04-17-2016, 11:37 PM   #7
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Question about transferring funds near date of death

I'm sorry to hear that your father is about to pass. I went through a similar experience with my Mom 1 1/2 years ago. Good that you are dealing with these details before he passes. Sometimes it helps to take our minds off the emotions of losing a parent by dealing with the analytics. Because I was handling the details of my mother's affairs I thought I was prepared emotionally. She spent a week in Hospice care and we were fortunate to be able to say farewell.
It hit me hard over the next 12 months as I finalized her estate and details after her passing. This really surprised me. Please be prepared for the emotions too.
I wish you the best.


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Old 04-18-2016, 06:11 AM   #8
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I'm sorry to hear that your father is about to pass. I went through a similar experience with my Mom 1 1/2 years ago. Good that you are dealing with these details before he passes. Sometimes it helps to take our minds off the emotions of losing a parent by dealing with the analytics. Because I was handling the details of my mother's affairs I thought I was prepared emotionally. She spent a week in Hospice care and we were fortunate to be able to say farewell.
It hit me hard over the next 12 months as I finalized her estate and details after her passing. This really surprised me. Please be prepared for the emotions too.
I wish you the best.


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Thank you. We've been saying goodbye for a while now but I know it will all be different once it happens.

Mom died suddenly in 2011 and 2 weeks later Dad broke his hip. That started his decline. We were just at the beginning of the grieving process for her and I just had to shut it all off and focus on him. I expect that losing him is going to open all that up again.

DH is very supportive and my sister and BIL are close.
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Old 04-18-2016, 06:25 AM   #9
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Excellent idea! My sister and I are equal beneficiaries of the tIRA. I will call tomorrow and see if that can be extended to a new Roth. Dad is beyond signing anything to designate beneficiaries but I am POA, so maybe I can do it.

DH and I are in 15% and sister and BIL are in the 33% bracket. We are the only beneficiaries of the tIRA.

Thanks so much for responding. I knew this was the place to ask questions.
I'm no tax expert but I would guess the transaction date would be the IRA withdrawal date, not when the funds are available in the bank. We wanted to do this when my Aunt was ill but her FA refused, even though my brother had POA. A considerable amount of medical deduction was not used.
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Old 04-18-2016, 02:18 PM   #10
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I would think that at the point he (or you as his POA proxy) takes a distribution from the IRA, that income would become a taxable event against his SS#. Seems like a reasonable strategy to keep $s out of uncle sam's pocket.
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Old 04-18-2016, 02:23 PM   #11
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why?
Why convert? If the coversion to Roth will be taxed at dad's rate (25%? 15%?) that's less tax to pay than later RMDs at a 33% tax rate. Plus, if dad has significant medical expenses, they can be deducted against the income from the conversion to Roth, thereby reducing the effective tax rate further.
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Old 04-18-2016, 02:42 PM   #12
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Why convert? If the coversion to Roth will be taxed at dad's rate (25%? 15%?) that's less tax to pay than later RMDs at a 33% tax rate. Plus, if dad has significant medical expenses, they can be deducted against the income from the conversion to Roth, thereby reducing the effective tax rate further.
OP said she is in the 15% bracket.... so maybe only convert to the top of 15%.... I would not do anything to hurt me to save my siblings some taxes when they are in the 33% bracket...


Taking more income also raises the threshold of being able to take medical deduction.... but if it is really high then yes it is an option...
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Old 04-18-2016, 03:10 PM   #13
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The tax withdrawl from the IRA sounds good to me too. The date of the transfer should be the effective date even if it takes a day or two to complete.
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