Gifting Roth IRA

Submitted by Robert Bytner on Tue, 2017-09-19 18:01

I am contemplating distributing my Roth IRA to my children using gifts less than the $ 14000. maximum this year & continuing every year until completely gone. To my mind, this will bypass the 5 year & life expectancy rule & allow them to do what they want with the money. Will I create any unforeseen problems or does it even make sense to do this? Thanks for any help.



Submitted by Alan - IRA critic on Tue, 2017-09-19 18:26

  • The big downside is that distributing your Roth IRA reduces the balance and eliminates tax free generation of earnings that the Roth would continue to produce during your lifetime and during the life expectancy RMD distribution period of the children after they inherit. 
  • During your lifetime, the assets will have been gifted and no available should you suffer some financial or medical shock including highly expensive long term care.
  • For the children, not having an inherited Roth which grows tax free even though they must take RMDs will cost them thousands in additional taxes over the years. Annual gifting may also reduce their incentive to continue to expand their careers. Note that if they inherit a Roth IRA, they can still take out more than their RMD whenever they want, there are no restrictions but they would be the ones to make that decision. Children frequently differ on how fast they they will distribute the account, some might limit to RMDs and others may drain the Roth in a lump sum distribution. Conversely, if you make annual gifts you will probably treat them all the same.

Submitted by Robert Bytner on Wed, 2017-09-20 02:32

I guess I should have included more information.  I’ll be 89 in 4 months. Seven kids range in age from 61 to 50. They have recently inherited a traditional IRA from their mother. I also have a TIRA  as well as a fairly substantial stock account. I have LTC insurance. My thought is this will allow a couple of the younger ones that don’t have a pension or 401, to start their own Roth.  I know now that it kills me to have to take an RMD from my TIRA & wish I had converted more when I had the chance.Thanks very much for your help.   

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