Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Gifting from Tax Deferred Accounts
Old 07-28-2008, 06:57 AM   #1
Recycles dryer sheets
 
Join Date: May 2007
Posts: 148
Gifting from Tax Deferred Accounts

Good morning--

I know an individual who wants to make a gift to his children. The bulk of his assets are in IRA's (traditional) and 401-K's. If he removes assets from the tax deferred accounts, I told him I believe he would have to pay ordinary income taxes on the assets he removes--he does not want to do this (no surprise there). He asked about the possibility of giving his kids shares in the mutual funds in his IRA's without liquidating them--e.g. just transfering the shares to them. I told him I did not think this would work--that it was still likely a taxable event since the shares were coming out of his tax deffered account. I said I knew of no way to avoid this tax hit.

Was I correct?

Thanks.

Thanks.
stephenandrew is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-28-2008, 10:02 AM   #2
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 143
Yes you are correct.

The only way the IRA can be transferred to his kids is on his death.

Withdrawals from the IRA will of course be taxable.
trirod is offline   Reply With Quote
Old 07-28-2008, 12:23 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
Name them as beneficiaries of his IRA. If the IRA is a significant portion of his retirement assets, and would disenfranchise his spouse upon his death, he could buy a life insurance policy equal to the amount of the IRA or a little more to make sure she's taken care of..........

As benficiary IRA's, his kids only have to take out their yearly RMD. Assuming of course they are many years younger, deferring taxes for another 30 years or so will really help his kids........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
IRA gifting
Old 07-28-2008, 06:56 PM   #4
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 141
IRA gifting

He'll receive a 1099-R for any distribution from his IRA.

A better suggestion might be for grandpa to make withdrawals and buy a wealth replacement insurance policy (take "just enough" from the IRA to push him right up to the limits of his income tax bracket).
TN_INVEST is offline   Reply With Quote
Old 07-28-2008, 11:14 PM   #5
Recycles dryer sheets
Linney's Avatar
 
Join Date: Nov 2006
Posts: 321
Quote:
Originally Posted by stephenandrew View Post
I know an individual who wants to make a gift to his children. The bulk of his assets are in IRA's (traditional) and 401-K's.
. . . .
He asked about the possibility of giving his kids shares in the mutual funds in his IRA's without liquidating them--e.g. just transfering the shares to them. I told him I did not think this would work.....
Your acquaintance needs to be reminded that IRA stands for Individual Retirement Account. It is not a Joint Account. Other people can only be beneficiaries of the account, they cannot share ownership of the account or its contents.

Your advice was correct.

Cheers!
--Linney
Linney is online now   Reply With Quote
Old 07-29-2008, 05:37 AM   #6
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 141
distributions and contributions must be made in cash. Unlike a non-qualified account, you can not transfer shares in-kind.
TN_INVEST is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
taxable vs. tax-deferred accounts - revise my plan? WM FIRE and Money 3 03-19-2007 07:49 AM
Rebalancing taxable vs. tax-exempt/deferred accounts AV8 FIRE and Money 22 02-08-2007 07:02 AM
Fund Tax Deferred Accounts on Jan 2 TromboneAl FIRE and Money 20 08-14-2005 06:48 PM
How to rebalance with tax-deferred accounts? soupcxan FIRE and Money 6 11-22-2004 02:06 PM
Taxable vs. Tax Deferred Accounts Theo FIRE and Money 1 06-03-2004 06:42 PM

» Quick Links

 
All times are GMT -6. The time now is 02:47 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.