How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Bill Your Own Question

Bill
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3077
Experience:  EA, CEBS - 34 years experience providing financial advice
Type Your Tax Question Here...
Bill is online now
A new question is answered every 9 seconds

83 yo mother in good health has $5000/month pension with $2000

Customer Question

83 yo mother in good health has $5000/month pension with $2000 month expenses. $300,000 in non-retirement accounts; $50,000 in traditional IRA. Two children will split assets. Both children in 35% tax bracket and not in need of money. What is the best way to get maximal amount of money to children-- gifting, Roth conversion, or other options?
Submitted: 3 years ago.
Category: Tax
Expert:  Bill replied 3 years ago.

Bill :

The mother is currently in at least the 25% marginal tax bracket based on her annual $60,000 pension income plus the required minimum distributions from her IRA. If she is also receiving social security benefits and taxable income from the $300,000 in non-retirement accounts then she may be just barely in the 28% bracket. If she converts the IRA to a Roth IRA, then she will pay federal income tax on the conversion amount at approximately a 28% rate. However, she will no longer have to take required minimum distributions and her children will inherit the Roth IRA income tax-free. If she doesn't convert then the children will inherit the traditional IRA and be forced to pay income taxes on withdrawals at their tax rates of 35% or higher (depending on tax rates in future years). If her gross estate is about $400,000, then federal estate and CO (if she is a resident there) estate taxes will not be an incurred so gifting is not a consideration for purposes of avoiding estate taxes. If the non-retirement assets consist of financial assets (such as stocks, bonds, mutual funds, etc) then any gifts of those assets will transfer the mother's cost basis on those assets to the children thereby losing the benefit of stepped-up date of death cost basis that would be available to heirs if instead they inherited those assets. However, one advantage of making gifts now would be that if the mother enters a nursing home more than 5 years after the date of the gifts (the look-back period) then those assets would be exempt from being considered resources in an application for medicaid eligibility.

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3077
Experience: EA, CEBS - 34 years experience providing financial advice
Bill and 3 other Tax Specialists are ready to help you
Expert:  Bill replied 3 years ago.
Stepped-up cost basis means that heirs assume the date of death fair market value of certain assets as their cost basis for purposes of determining the amount of gain or loss when those assets are eventually sold. For example, if the decedent owned common stock that he/she purchased for $10,000 and held until the date of death when the stock was valued for $100,000, then the heirs assume the $100,000 as their cost basis. If the heirs sell the stock for $110,000 then they only pay tax on a $10,000 gain ($110,000 - $100,000) because the cost basis is stepped-up from $10,000 to $100,000 (the fair market value on the date of death).

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.