NYC TDA
I am a retired NYC educator who has a large amount of money in the TDA. I was wondering how I could minimize estate taxes so my heirs could enjoy the fruits of my labor. Should it be rolled out into an IRA with my wife as beneficiary and two kids as contingent beneficiaries and upon my wife’s passing they can then stretch the remaining amount over their lifetime? I am 65 and my wife is 63. Thus far the TDA has not been touched. Thank you.
Permalink Submitted by [email protected] on Tue, 2010-04-27 21:15
[size=150]Hello Jay,
That would be the preferred route to take. You want to get out from under the new IRS rules governing the 403B TDA world and go with a rollover IRA. I would suggest the IRA be with some provider that prior to beginning with, you get approval of the fact that your wife could disclaim any payment to her as your beneficiary and thus allow for the account to go to the children as contingents. This may seem odd be there are situations where the family would be best off doing this. The most likely is her health being poor. Her disclaiming of the money is not considered a gift and is not subject to the lookback provision of medicaid. Also you would want to have multiple accounts ( 5 for example if you have so much built up) not just one IRA to give even more latitude in the event of your death. Thus your wife could disclaim 2 IRAs and keep the other 3 IRAs depending on her needs, or keep 1 and disclaim 4. Then the children could get the money and do a stretch with it over their lifetime. Lastly as the years go by, you could change the contingents to your grand kids with their longer life expectancy.
Hope this helps- Matt O’Brien [/size]
Permalink Submitted by Jay Rosler on Tue, 2010-04-27 22:19
Matt,
Thanks so much………………very helpful!
J
Permalink Submitted by Alan Spross on Wed, 2010-04-28 02:10
It is a challenge to render any meaningful advice on estate taxes since Congress has left us totally in limbo for this year. Going forward, the estate tax is scheduled to be reinstated in 2011 with a unified credit of only 1,000,000, which I believe is the amount that also applies in NYS. You will have to monitor developments in estate tax legislation and perhaps seek professional advice to develop a plan if your estate ends up over the unified credit level scheduled in the next legislation.
It might be that a partial Roth IRA conversion will improve both your future income tax situation, as well as your heirs. In addition, the taxes paid on Roth conversions are removed from your estate and therefore can reduce the federal and NY estate taxes. Of course, there are many other considerations as well.
Permalink Submitted by Jay Rosler on Wed, 2010-04-28 02:59
Thanks for the advice