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When you hear "legacy planning," you may assume that it's an aspect of estate planning reserved only for the wealthy. A recent Next Avenue article ("2 Money Moves to Help You Leave a Legacy," February 2015) details ways that anyone can leave something behind for their heirs.


One easy way to pass funds to your heirs is by converting a traditional IRA to a Roth IRA. There are no required minimum distributions at age 70-1/2 for a Roth IRA, which means it can grow tax-deferred throughout your lifetime. This increases the amount you can leave behind.


TIAA-CREF can help you leave a legacy while saving for retirement.


Here are a few strategies:


  • Help grandchildren with college costs by contributing to a 529 plan. Plan details vary by state, but a 529 plan provides tax advantages on savings intended for higher education expenses, such as tuition, books and other qualifying fees. Some important points:
    • Growth on contributions is tax-free.
    • Withdrawals for qualified college expenses are tax-free.
    • There are tax consequences for withdrawing funds for a nonqualified expense.
    • There are no annual contribution limits, but there are lifetime limits. Gift taxes are incurred if you gift more than the annual gift tax exclusion amount, which is currently $14,000.
  • Fund a traditional or Roth IRA for a family member. You can contribute up to $5,500 a year if your beneficiary has at least that amount of earned income. This can be a great way to give a younger family member an early start on retirement savings.
  • Purchase life insurance. You can use this option in two ways:
    • Purchase a universal or variable life insurance plan for your child to fund survivor income for your grandchild. Your son or daughter can also benefit from tax-deferred growth on the policy's potential cash value. Variable policies can allow your son or daughter to access funds through tax-free withdrawals or low-cost loans to help pay for major expenses, such as college or buying a home.
    • Purchase a permanent life insurance policy for yourself with your child or grandchild as the beneficiary. The death benefit can be used to pay your end-of-life expenses and leave generally income tax-free funds to your beneficiary.


The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. Past performance does not guarantee future results.


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