Gifting Roth IRA to Child to get it and “Future Growth&
of Estate prior to death?????
My common sense says this is no if it is a non-roth.
My common sense says why shouldn’t this be legal since…
1. The Roth imposes no RMD to parent.
2. It does impose RMD to a non-spouse beneficiary upon death based on
beneficiary life expectancy .
3. If so, why can’t this Roth be gifted prior to death and even placed in a trust
that would require RMD at death of giver?
What is the difference with this vs placing child as beneficiary?
I think the value over the $12,000 per year rule would certainly apply .
Is this over $12,000 rule, simply the amount over is eventually subtracted
from deceased persons estate tax threshold , whatever, that might be at time of death?
Or, are there some other taxes or twist to gifting over the $12,000 rule?
You folks are some of the brightest minds I’ve ever experienced in my 60+ years . Sincere thanks for your time and expertise to us other folks who get so confused with a tax system and laws which are impossible to understand and very frustrating. I wish I had a talent of some type to give back…you have motivated and inspired me to seek out what it might be. Thanks again
Permalink Submitted by Alan Spross on Wed, 2008-04-23 03:59
Thanks tomd37 for reply.
Part of my reasoning is if I own something I would think I have the right to give it away as long as the taxes were paid on the gift. And even if it were an Ira , if the rules were followed for distribution exactly as they would be followed under the trust arrangement I have set up now (effective upon my death) , I just can’t grasp why it can not be done. No difference from my prospective.
My mine slips alot , forgive me …don’t quite understand what your reference to “individual” means. Please try 1 more time.
Permalink Submitted by Newt Pearson on Wed, 2008-04-23 04:11
One more thought…
There are many assets that can be gifted away prior to death that will appreciate from that time forth and the appreciation/growth is forever out of the giftors estate (if I am understanding correctly). Why not the Roth? Hard to grasp if you are correct. Thanks again
Permalink Submitted by Alan Spross on Wed, 2008-04-23 04:27
The basic philosophy here is that all the various tax benefits allowed on IRAs and employer retirement plans are there to allow the individual to save money while working to accumulate assets for their retirement. As a result, taxpayers need to depend less on the govt for support in retirement. If these accounts were allowed to be gifted, particularly to a younger person, they could be spent for other than retirement purposes. If placed in a trust, the donee may not be able to spend the money until the donor passed, but neither would the donor have access to it in his own retirement. As a result, access to the funds in retirement would be forfeited if the donor eventually needed the funds.
Permalink Submitted by Newt Pearson on Wed, 2008-04-23 16:32
alan-oniras…thank you. Where do you get your wonderful insight ? Very well put .