Looking for tax strategies against the RMD of IRAs

[whitestick]

Is there a way to directly transfer money from an IRA into an education type of IRA (Coverdell??) for grandkids education, without incurring taxable event and still satisfy the RMD requirement. If so, then hopefully, it would not increase my taxable AGI once the RMDs kick in on the IRA at 70 1/2, and could provide a benefit to heirs as well, who would end up with the funds eventually anyway.

 

[OAG]

Good luck in finding a way to do that. If you do, be sure to post it here. Frankly, I doubt there is a way to avoid or even mitigate the taxes on a traditional IRA that has previously untaxed funds in it. May want to look up the threads on moving T-IRA funds to a ROTH staying within your current tax rate; that is the only way to mitigate the RATE of taxes that I know of.

 

[ziggy29]

I don't think so. Most of the usual tax dodges only apply to earned income, which RMDs aren't.

The only think I can think of is Roth conversions before your RMDs kick in, but depending on your current tax rate, that might not help much.

 

[Texas Proud]

Now I have to admit..... this is really stretching it when someone wants to defer taxes...

But I am in the NO camp.. at least not without breaking the rules...

Remember.. the RMD is REQUIRED minimum distribution, kind of limits you.

 

[unclemick]

I don't think so. Most of the usual tax dodges only apply to earned income, which RMDs aren't.

The only think I can think of is Roth conversions before your RMDs kick in, but depending on your current tax rate, that might not help much.

Ditto! Yep! Amen! If someone has a better plan - I'm all ears - cause for all practical purposes a Traditional IRA is my retirement - at least the 60% or so of income provided by portfolio. 6 yrs to RMD - 23% tax bracket(if I take 5% variable). 8% of total in Roth and 15% in taxible dividend stocks.

I play with ORP - The Optimal Retirement Planner - still get a goodly hit tax wise - single, standard deduction.

heh heh heh - soooo anybody got a cute strategy?

Pssst - other than a house with a big mortgage and taking in female boarders!

 

[Martha]

No, it isn't going to work.

At best, take the RMD, pay taxes, and put the unneeded money into the Coverdal and let it grow tax free.

If you don't need the money another option is to give it to a charity directly from the account as you can avoid taxes that way.

Don't forget my signature line. I might not know what I am talking about.

 

[trirod]

The only way I can think of is the direct charitable contributions from your IRA. This counts toward your RMD, so if you make charitable contributions anyway, making them out of your IRA reduces the tax impact a little (of course you don't also get to itemize the contributions).

Otherwise doing Roth conversions in years before you reach 70.5 when you are in a lower tax bracket - say to use up your 15% bracket - is a good strategy.

 

[cute fuzzy bunny]

Havent gotten to this point yet in life so i'm not certain, but I have a funny feeling there is a way to dodge this. Cant you gift stock from your ira to the kids to put in their college plan without actually selling it, have that qualify as an RMD since you've taken a distribution, yet trigger no tax since nothing was sold and as a gift, its not taxable on the kids end? I think you screw up the step-up basis as their basis would now become your original basis, not the value on the date of the gift. However you could sell a current holding to buy shares on the day before making the gift, which would eliminate most of that problem.

Alternatively cant you take your RMD and use it for expenses, put the balance of the IRA and some other assets you otherwise would have used for expenses in trust and pass the trust directly to the grandchildren with instructions for using it for educational purposes, bypassing their parents, and skip a tax generation?

What martha says goes double when listening to tax ideas from the bunny...

 

[Martha]

Havent gotten to this point yet in life so i'm not certain, but I have a funny feeling there is a way to dodge this. Cant you gift stock from your ira to the kids to put in their college plan without actually selling it, have that qualify as an RMD since you've taken a distribution, yet trigger no tax since nothing was sold and as a gift, its not taxable on the kids end? I think you screw up the step-up basis as their basis would now become your original basis, not the value on the date of the gift. However you could sell a current holding to buy shares on the day before making the gift, which would eliminate most of that problem.

Ah, nope.

 

[cute fuzzy bunny]

Oh well, I tried to aid and abet in tax weaseldom.

Did I mention lately that I hate taxes?

 

[unclemick]

Sooo - one of those really big nothing down mortgages - fix and flip every two years(you live in the house) wouldn't pencil out either - eh?



heh heh heh

 

[youbet]

Is there a way to directly transfer money from an IRA into an education type of IRA (Coverdell??) for grandkids education, without incurring taxable event and still satisfy the RMD requirement.

No.

But your post made my afternoon. I always appreciate open brain storming where no idea is too out of whack to make the further discussion list!

 

[whitestick]

Thanks all. I was hoping for a different answer, but at least I got a better idea of what won't work. Drat! and then there's the AMT problem as well.
Thanks again.