This is about leaving a legacy to children/grandchildren. It looks like the IRS will soon require any non spouse inherited Traditional IRA's to be liquidated by the beneficiary either as a lump sum or under the 5 year rule....no more stretch IRA's where the beneficiary could "stretch" the proceeds from a Trad. IRA over their lifetime.
I am now thinking that it may be better from a tax perspective (for my heirs) if I begin spending down from the Trad. IRA before 70 1/2 ( before RMD's) for retirement income and try to preserve my taxable assets for my heirs. My thinking is that beneficiaries will still receive ( unless the IRS also changes this rule) a stepped up cost basis on assets within a taxable account which could be substantial if equities have appreciated over a 40 year period.
Understanding that estate taxes will be due on taxable and tax deferred assets left to heirs , but by spending down assets in a Traditional IRA over my lifetime , I would not be leaving a $2 million Traditional IRA to my children/grandchildren which would need to be liquidated over 5 years creating a huge tax burden and money grab by Uncle Sam.
What is your thinking on this strategy?
By the way ....I am doing Roth conversions but no way will I be able to convert the entire Trad IRA to a ROTH over the next 10 years.
I am now thinking that it may be better from a tax perspective (for my heirs) if I begin spending down from the Trad. IRA before 70 1/2 ( before RMD's) for retirement income and try to preserve my taxable assets for my heirs. My thinking is that beneficiaries will still receive ( unless the IRS also changes this rule) a stepped up cost basis on assets within a taxable account which could be substantial if equities have appreciated over a 40 year period.
Understanding that estate taxes will be due on taxable and tax deferred assets left to heirs , but by spending down assets in a Traditional IRA over my lifetime , I would not be leaving a $2 million Traditional IRA to my children/grandchildren which would need to be liquidated over 5 years creating a huge tax burden and money grab by Uncle Sam.
What is your thinking on this strategy?
By the way ....I am doing Roth conversions but no way will I be able to convert the entire Trad IRA to a ROTH over the next 10 years.