1 Reply Latest reply on Oct 19, 2012 5:18 PM by JerryD

    Beneficiary for tax-sheltered funds?

      I very much hope not to exhaust all my available 401, IRA,  Tiaa-Cref funds, before I die. I have other investments also, and men in  my family have not lived terribly long lives, so I don't see a need to  annuitize everything, and I don't really expect to live to 91 (I'm now  68 and retired.)  My impression is that tax-deferred funds left to a  child may wind up incurring unusually high income tax rates. My solution  is to leave some or all of those funds to charity. An easy way to do  this is to leave them to a donor-directed fund, e.g. in many cities a  "community foundation".  I file a letter with them specifying to which  charities the money should go when they get it. Changing that letter  every few years is far easier than changing a will or even beneficiaries  to IRAs and the like.
        • Re: Beneficiary for tax-sheltered funds?
          I hope that your understanding about leaving tax-deferred funds to kids are not overly taxed. Our entire strategy is based on leaving all deferred funds to the surviving spouse followed by the secondary beneficiaries which are the kids. There is one exception, I hope to soon create another IRA that pays out most of our charitable gifts to named charities that are specified as secondary beneficiaries. This will prevent a fire sale of the house or other assets to satisfy these gifts.
          We have another strategy related to deferred funds. That is converting as much of our  traditional IRA's to Roth's and paying the taxes from non-deferred funds as we can afford.  These funds will be available to us tax-free as "emergency" funds should we need them.
          In both cases any funds left to kids will be paid out over their IRS-defined lifetimes (quite long allowing for growth over the payouts), the Roth payouts will be tax-free. I have also left an instructional letter strongly suggesting to the kids to take any inherited, mandatory payouts and invest them in Roth's to propagate the deferred nature of any after-tax funds they inherit. Another possibility is for them to put those funds into educational accounts for grandkids and great grandkids. This strategy is strongly supported by a well-known IRA/Roth expert and is referred to as "stretch IRA's". These strategies may even impact the lives of 2-3 generations after we pass.
          Hope this gives some ideas.