Property for my son out of my Rollover Ira?

[Ocmd]

Hello! I'm a 67 year old retiree that wants to buy a condo for my son in Ocean City, MD... My house is paid off and I am set for life with my pension and SS..

My question is how do I buy a place for my son using my Rollover IRA money to pay for it all? He's going to get it anyway as a beneficiary so I'd like to see him enjoy it while I'm still around.. Is there anything I can do to minimize the taxes? Does the IRS really care how I spend my retirement money after it's already been taxed?

Thanks!
OCMD

 

[Bamaman]

I don't think the IRS cares how you spend your IRA Rollover money as long as you pay the full income taxes on the year the funds were withdrawn.

You could split the withdrawals over two calendar years to possibly save a little.

If you pass away and your son inherits the IRA(s), he'd also have to pay income taxes on the funds withdrawn. But he will only have 10 years to empty the account. Many children in this situation find themselves paying much, much more taxes than the parent(s) would pay because they usually have careers and are in a higher tax bracket than us retirees.

 

[omni550]

I don't think the IRS cares how you spend your IRA Rollover money as long as you pay the full income taxes on the year the funds were withdrawn.

You could split the withdrawals over two calendar years to possibly save a little.

If you pass away and your son inherits the IRA(s), he'd also have to pay income taxes on the funds withdrawn. But he will only have 10 years to empty the account. Many children in this situation find themselves paying much, much more taxes than the parent(s) would pay because they usually have careers and are in a higher tax bracket than us retirees.

For my needs, it made sense for me to get a mortgage loan (which was at 2.89% five years ago), leaving the IRA funds invested, and withdrawing the mortgage payments from the IRA over 10 years...thus spreading-out the income tax impact.

omni

 

[SnowballCamper]

I'd look for a way to distribute the money from your IRA over several years. To have $400k to spend on the condo you'd have to withdraw close to $615k, and be well into the 35% tax bracket.

Decide on the tax bracket you can tolerate, then mortgage the condo over a few years to spread it out. This might be a good use of a 5/1 adjustable rate mortgage.

Also, check into the gift tax rules.

 

[Koolau]

Keep in mind there are IRS rules for gifting to anyone. I don't know how that works if you gift a house. It might be that you could gift the maximum toward paying a mortgage for your son.

I know you came here for advice, but keep in mind that we are not experts (and you don't pay us.) Therefore, take what we say with several grains of salt. Hire a professional for an hour as this could be an important question to answer before you begin your gifting. And remember, YMMV.

 

[ncbill]

Keep in mind there are IRS rules for gifting to anyone. I don't know how that works if you gift a house. It might be that you could gift the maximum toward paying a mortgage for your son.

I know you came here for advice, but keep in mind that we are not experts (and you don't pay us.) Therefore, take what we say with several grains of salt. Hire a professional for an hour as this could be an important question to answer before you begin your gifting. And remember, YMMV.

It's no big deal...you file another form with your tax return & use up part of your lifetime credit.

As another poster said it's better for the OP to get a mortgage instead of withdrawing hundred of thousands of bucks & paying hefty taxes on that lump sum withdrawal.

 

[street]

It's no big deal...you file another form with your tax return & use up part of your lifetime credit.

As another poster said it's better for the OP to get a mortgage instead of withdrawing hundred of thousands of bucks & paying hefty taxes on that lump sum withdrawal.

X2. Property gifting work the same way as gifting money lifetime filing.

 

[TripleLindy]

I did a similar thing for my kids over the past 2 years. 1 more to go late this year or early next. As you say, it would be part of their inheritance, but this way we get to see them enjoy it. The gift tax thing is a non-issue, meaning there is no actual tax unless you’re gifting a HUGE amount, but kind of a pain to figure out. Typical government/IRS idiocy. As an example, there’s a box to check for a joint filing if gift is from both you and your spouse. Yet, each of you is required to fill out a separate form with 50% of the gift amount each. And trying to figure out how to enter the gift amount requires a PhD in government hoop jumping.