RMD’s
I have a gentleman that has a million dollar IRA Brokerage Account . Him and his wife are in their 70’s taking RMD’s. His current portfolio is 65% CD’s and 10% equities and 25% bonds. He would like to increase cash reserve and decrease tax liability. He is concerned about estate planning especially with the 2011 1million dollar exclusion. I understand that in 2010 you can convert to Roth although I am not sure if this would be best for him given the conversion tax hit. We have presented an Equity Indexed Annuity for about 250K of it. This would give him Safety of principle with guarentee income for him and his wife for life with the opportunity to more than outpace inflation. Any suggestions? 😀
Permalink Submitted by Alan Spross on Sat, 2008-12-06 18:14
I would be shocked if the unified credit was ever allowed to reinstate at 1 million in 2011. Estate and political pundits almost unanimously agree that Congress will act next year to establish a reasonable credit of 3.5 million as a minimum and possibly double that, with the credit from the first spouse’s death carrying over in some fashion to the surviving spouse.
This is not to say that some combination of a Roth conversion or annuitization of a portion would not be a valid approach, but it should be driven by tax and beneficiary estate planning rather than estate tax concerns. Any Roth conversion should not be done with a large portion of the account at one time, or the marginal tax rate on the conversion would offset much of the benefit. That said, a 2010 conversion offers to spread the tax over the next two years with half the income reported in 2011 and the rest in 2012.
His current asset allocation appears quite sound and if also applied back at the beginning of the year, he is in better shape than most, much better.