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Amazon the corporation didn't pay US tax. Bezos did. There's a difference. Lots of corporations don't pay taxes for years, especially when they have a significant loss carry forward position. In other words, if Amazon lost $20 billion over some years, they get to carry that loss forward until it's used up offsetting future profits. Here's an article with some explanation https://www.cnbc.com/2019/04/03/why-...ncome-tax.html
Keep in mind that, depending on how the corporation is structured, there may not be any US tax payable on foreign earnings.
From my googling Bezos might pay $1000 in personal income tax. His salary is like $87,000 or something like that. You may get your wish to pay boat loads of tax, but not many people like to pay taxes.
Late to the game here, but in the event of a high-value inherited IRA (non-roth), would another inheritance strategy be to spread the amount out among NUMEROUS beneficiaries? For instance, say OP has 2 kids and 4 grandkids. What if each of them is named as beneficiary @ 16.6% of the value of the fund. Let's assume the value of the IRA is $500,000. Not accounting for earned interest, taking that over 10 years divided by the 2 kids means $25K/YR for each that's taxable. It might put them into a higher bracket. On the other hand, spread over 6 beneficiaries, this goes down to $8,333 per year per beneficiary. You'd have to add interest, but that's the gist. The beneficiaries could then take that and put it into a tax free non-RMD Roth.
Another strategy the OP mentions (in a round about way), would be for the OP to leave the ROTH's as-is, and deplete the non-Roth's over their lifetimes, or deplete after the non-Roth is inherited by the spouse (which doesn't trigger the 10year rule). This would likely make sense as the OP and spouse would probably be in a lower tax bracket.
Last edited by sammythebull; 02-26-2020 at 01:56 PM..
We are 71/62 with over $1M in tIRAs.
I am converting about $100+K per year for the next decade to Roth IRAs. Taxes will be paid from the tIRAs.
I will likely croak before my wife.
She will leave tIRA monies to 1 child and 2 grand kids. All the Roth and taxable account monies will go to our child.
I don't mind paying the taxes as we knew all along that we would have to pay.
I do mind the sudden change in the rules.
The problem is that you are making 30-40 plans and Congress has a planning horizon of a few weeks.
I'm thinking Sammy's idea might work for me. I can leave half to my son and a quarter each to my 2 grandkids. But then who would be the contingent beneficiaries? Have to think about that
For some unknown emotional reason, I hesitate to convert large amounts every year to a Roth. Seems like I will be paying an awful lot of taxes all at once. I am 71.
I'm wondering how you split up an IRA among several beneficiaries without selling off all the investments in the IRA. Do you split up the shares of each stock, bond or mutual fund? What if some of the beneficiaries are minors? I only have 1 son, but have 2 grandsons who are minors. It's a lot to think about.
I'm wondering how you split up an IRA among several beneficiaries without selling off all the investments in the IRA. Do you split up the shares of each stock, bond or mutual fund? What if some of the beneficiaries are minors? I only have 1 son, but have 2 grandsons who are minors. It's a lot to think about.
Currently I have beneficiaries designated this way:
Primary beneficiary = 100% to my son
Secondary beneficiary = 50% to grandchild #1 and 50% to grandchild #2
Both grandchildren are minors. If they inherit I don't know how it gets split up. Don't know if they would sell enough shares to make an even split or sell all funds. How they do it will be according to the financial company I suppose. At that point it won't be my problem.
When I inherited my mother's IRA the money was in a CD. The money stayed in the CD until the CD came due. I only had to tell them when (what date) I wanted my RMD each year.
I'm wondering how you split up an IRA among several beneficiaries without selling off all the investments in the IRA. Do you split up the shares of each stock, bond or mutual fund? What if some of the beneficiaries are minors? I only have 1 son, but have 2 grandsons who are minors. It's a lot to think about.
Nellie: The entire fund wouldn't be sold off to each of the 3 beneficiaries, but as of the date of the death/transfer, the total account is divided 3 ways and separate accounts are set up in the names of each of the 3 beneficiaries. Example: You have a vanguard mutual fund that's worth $90,000 on the date of death. The 3 beneficiaries claim the account after death, and vanguard takes the $90,000 out of your account, then puts $30,000 in each of the beneficiaries' accounts. They also would have the option to transfer the funds to a different institution --- this sometimes occurs when 401K or other types of retirement funds might have rules about distributions -- sometimes say 5 years instead of the 10 under a traditional IRA. In that case, it makes more sense to transfer to an IRA to stretch out the distributions (and taxes).
If you are naming a minor as beneficiary of the IRA, you basically have 2 options. The easiest method is to name each of the minor grandsons, but name your son as custodian of the account until they reach the age of majority in your state. Depending on your state, you'll want to check the statute to see how it guides which language to use (example: In my state, it's "John Doe (adult), as custodian for Mike Doe (minor), under the (state) Uniform Transfers to Minors Act. Also good to name a backup --- e.g. in the even that John Doe predeceases Mike Doe, I name Mary Doe as custodian...
The second way is to set up a trust for the minor, then name the trust as beneficiary. The other advantage to the trust route is IF you'd say not want the now minor to have control or access to the funds/account until they reach an age past the statutory majority age (say 25, 35, or later). This is sometimes done when the minor might be irresponsible and you wouldn't want them to blow a large inheritance on frivolous things.
I hear this often, and I understand. But.....it'll be someone else's problem. Example: My father had set up accounts for his grandkids (my kids - who are minors), and the bank didn't give him the option to name a successor custodian on the accounts so he didn't. He died unexpectedly. Bank refused to give anyone access over the accounts for the minors, because no successor custodian was named (and the custodian was dead). I had two choices - either wait until they reach the age of majority, and not have any control over how the funds are invested (they were in a CD that renewed automatically at a certain rate), or get a court order naming me as custodian.
I got a court order, but I can tell you it was a pretty big hassle, and had I not did the legal paperwork myself, rather costly. I'm sure he wouldn't have wanted it to be that way. If you care about who you are leaving your things to, then likely you wouldn't want it to be their problem either.
I'm wondering how you split up an IRA among several beneficiaries without selling off all the investments in the IRA. Do you split up the shares of each stock, bond or mutual fund?
Yes - I recently went through this with my brother. I already had accounts with the company (Roth IRA and Investments), so they moved 50% of each mutual fund to a newly created Inherited IRA account for me. He did not have an account, so they created a new Inherited IRA account for him and moved the rest of the funds there.
I hear this often, and I understand. But.....it'll be someone else's problem. Example: My father had set up accounts for his grandkids (my kids - who are minors), and the bank didn't give him the option to name a successor custodian on the accounts so he didn't. He died unexpectedly. Bank refused to give anyone access over the accounts for the minors, because no successor custodian was named (and the custodian was dead). I had two choices - either wait until they reach the age of majority, and not have any control over how the funds are invested (they were in a CD that renewed automatically at a certain rate), or get a court order naming me as custodian.
I got a court order, but I can tell you it was a pretty big hassle, and had I not did the legal paperwork myself, rather costly. I'm sure he wouldn't have wanted it to be that way. If you care about who you are leaving your things to, then likely you wouldn't want it to be their problem either.
While I agree I don't want to leave messy problems for our children, I'm not sure I consider them having to pay taxes on an inheritance much of a problem!
If I think of our Traditional IRA's as family wealth, then ideally the best solution is the one that distributes it into the lowest possible tax brackets. Unfortunately, or fortunately, that seems fairly impossible to predict at this point. Not to mention it would involve a level of involvement in the kids finances that I want no part of!
I'm going to wait a while and see if anyone comes up with something more creative before I decide to do anything about this.
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