Giving Standard IRA to children to remove from estate
I am 85 and I have a standard IRA that I do not need either the RMD or the principal. The children will inherent the IRA when I die — they are the beneficiaries; however, I would like to remove the IRA from my estate for good and valid reasons. I know that the IRA is not subject to probate.
Since there is no step up in cost at the time of my death — the cost value is zero, is there a way to give the IRA to the children so they can start withdrawing the same as if they had inherited the IRA? I know that I can simply liquidate the IRA and give them the cash, but I would be hit with a large income tax bill. I would like to transfer the stocks and mutual funds “in kind” to the children.
I would like for the children to withdraw the funds over their life time expectancy like an inherent iRA.
Permalink Submitted by Alan - IRA critic on Sun, 2019-06-16 16:26
There is no way to that. Either they inherit the IRA or you will have to take taxable distributions (cash or in kind distributions) and gift the proceeds to them. Currently, the gift tax exemption is 15k per year per donee. Another option is to do incremental Roth conversions (after you complete the RMD each year) if your marginal rate is lower than the children. Finally, note that under potential tax bills in both houses of Congress, the lifetime stretch for non spouse beneficiaries would be limited in various ways. They could be looking at a distribution period of no more than 5 years depending on the value each inherits.