Case #7 · Sam and Anna P.
IRA Trust
Defusing an $800,000 "tax time bomb" IRA.
The situation
Sam and Anna of Burlington County, New Jersey, raised four children. After Sam died, Anna rolled his IRA into her own.
Her $1.6 million estate includes an $800,000 IRA, plus her home, CDs and mutual funds.
The goals
- Provide principal and income for the four children
- Benefit her favorite charity
- Reduce the income tax on the IRA
The strategy: An IRA trust named as beneficiary
- Anna names the trustee of an IRA trust as beneficiary of her IRA.
- At her death, the $800,000 IRA passes to the trust, which is invested for a 15-year term.
- Over 15 years, the trust pays just over $800,000 to the children.
- Each child also receives almost $200,000 from the rest of the estate at Anna's death.
The results
| Income to the children | Just over $800,000 over 15 years |
|---|---|
| Principal at Anna's death | Almost $200,000 per child |
| To charity after 15 years | About $1 million |
Figures are illustrative and based on the tax rules in effect when the case was prepared. Results vary.
Could a strategy like this work for you?
Every family is different. We will look at your situation and show you which ideas apply, at no cost.