We also have a significant amount in tIRAs and are dismayed about the new 10 year withdrawal for non spouse beneficiaries. So our plan is for the first to die to disinherit the remaining spouse tIRA thus reducing the survivors taxable income and spreading the kids inheritance out. We are doing Roth conversions from the spouse who also has pension and the higher SS.
What do you think of the plan to disinherit the tIRA? We still need to meet with the estate attorney to set this plan up correctly.
I'm considering a similar plan for similar reasons. I tentatively plan to disclaim (the proper term; it's also sometimes called renunciation) 75% of my portion of my Dad's traditional IRA. This will split my portion into four equal parts among me and my three children, which in turn should approximately level out and minimize the taxes due during that 10 year window.
There are a couple of things I've found out that might be helpful to know:
1. First make sure that the surviving spouse has adequate resources to fund the rest of their life. Sounds like this will be the case for you.
2. You have to make sure that the beneficiary designation on the IRA (or the will if that's how you're handling it) is set up properly. In my state, and I think this is true generally, disclaiming an inheritance is treated as though the person named has predeceased the original owner.
In my case, my Dad originally had his beneficiaries set up as 1/3 to each kid. Which would have not worked for my disclaimer idea, because had I disclaimed, then whatever I disclaimed would go to my siblings. (Which would have been fine, but not what I was aiming for. And my siblings don't need the money either.)
So I talked with my Dad and he confirmed that if one of us kids predeceased him, he wanted the predeceased kid's portion to go to that kids' children. (Each of us kids have three kids, so my Dad has nine grandkids.) So he changed his beneficiaries to 1/3 to each kid
per stirpes. That
per stirpes thus accomplishes my Dad's preferences. It also means that if I disclaim, whatever I disclaim goes to my kids instead of my siblings.
You *might* be able to achieve a similar effect with secondary / contingent beneficiaries. I'm not sure on that.
3. As implied in the previous item, you can, as long as state law permits (which my state does; it's also permissible at the federal level), disclaim a portion of an inheritance or even a portion of an individual inherited account. This may be useful to you for fine tuning.
4. Disclaimers have certain legal requirements - IIRC they have to be in writing, sent to the executor and the applicable court, within a certain timeframe, and have to be irrevocable, and some other requirements.
5. Depending on when you die, you might be able to spread the distributions across 11 tax years. The SECURE Act gives you until 12/31 of the year which contains the 10 year anniversary of death. So if a person dies in February, you really have 11 tax years to spread the distributions.
Obviously, check all the above with an estate attorney and/or tax professional who is qualified in your state. State laws around inheritance differ, sometimes greatly.
