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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11147
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am 81yrs old and am forced to take a large yearly minimum

Customer Question

i am 81yrs old and am forced to take a large yearly minimum distributions from my IRA.
I WOULD LIKE TO CONVERT SOME OF THESE OR MORE MONIES INTO AN IRA ROTH ACCT WITHOUT
GOING INTO MY NEXT TAX BRACKET........ANY IDEAS?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,Plese don't "shoot the messenger here," but this just can't be done. Although there ARE some things our that that can help to offset the tax on RMD's the conversion itself is a trigger; (the conversion will cause tax reporting to be done by the IRA custodian - the copy of 1099-R that goes to IRS)Some of the strategies out there, however, are as follows:
Expert:  Lane replied 1 year ago.
AA charitable remainder trust (CRT) starts when you transfer an appreciated asset into an irrevocable charitable remainder trust. This removes the asset from your taxable estate, so no estate taxes will be due on your estate at your death. You also receive an immediate charitable income tax deduction for your income tax return for the year of the transfer, to reduce your current income taxes.The trustee of the charitable remainder trust (CRT) then sells the charitable trust asset at full market value, paying no capital gains tax, and re-invests the proceeds from the sale of the trust asset into income-producing assets. For the rest of your life, or your life and others, the trust pays you an income. When you die, the remaining trust assets go to the charity(ies) you have chosen. That's why it's called a charitable remainder trust.
Expert:  Lane replied 1 year ago.
Some lifetime annuit. ies satisfy the RMD rukes still making payments less than your RMD over your lifetime.
Expert:  Lane replied 1 year ago.
You can also put the money into a profit sharing plan and have the plan contribute systematically, capital to a life insurance policy. You remove the policy from the plan by buying it out for the appraised value. This has the added advantage of providing a significant death benefit ( and can, when used in conjunction with a CRAT, make upmm for - tax free- what went to the charity, for the beneficiaries)OR you can then use the contract to to take tax free income as long as you leave enough in the policy so that is doesn't lapse.
Expert:  Lane replied 1 year ago.
A more subtle way to help minimize your FUTURE RMD; Holding lower expected return asset classes, like bonds, in your RMD related accounts will help keep any growth of RMD accounts in check so you do your best as to not unnecessarily grow your future RMD’s and tax liability.
Expert:  Lane replied 1 year ago.
And... depending on your situation, estate planning goals, income needs, etc., there are others ... but again, the conversion itself is always a taxable event, if the IRA's hold pre-tax money.
Expert:  Lane replied 1 year ago.
Let me know if you have questions ... Lane I hope you'll rate me (that's the only way we get credit for the work here) based on thoroughness and accuracy, rather than any good news/bad news content ... Hopefully, having all the facts will help you "see around some corners."