Han wrote:

- quote -

True enough, the funds were likely never taxed when
contributed (i.e. deductible IRA or tax-deferred employer
plan) so someone has to pay the income taxes when funds are
withdrawn after death. On what schedule, depends on the ages
of the beneficiaries and whether or not the decedents had
reached their RBD (generally age 70-1/2 or above). The Roth
IRA would probably be TAX-FREE if it had been in existence
for more than 5 years and the decedent taxpayer was over age
59-1/2 (qualified distribution). If not, withdrawal of
contributions will be tax-free, but there may be tax due
when the earnings are withdrawn.

- quote -

The taxpayer can always buy life insurance and name the
grandchildren as beneficiaries. Using the IRA funds to buy
or pay the premiums for these policies would be a
"prohibited transaction" and would immediately invalidate
the tax-deferred status of the IRA.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Hypothetical situation:
Happy, healthy couple has potential estate valued at over $2
million, wanting to bequeath proceeds (whatever it's called)
to children for the benefit of grandchildren (each child has
some children). The major portions of liquid/semiliquid
funds are in IRA-type accounts (IRA, Roth, 403b7).

Advice was given that even via trusts, the proceeds would
count as income to the recipients, and thus would be subject
to income tax, even if not subject to US or NJ estate taxes.

One suggested alternative would be to set up life insurance
policies with the grandchildren as beneficiaries.

I'm asking for comments and alternative suggestions,
including links to trusted web sites before the official
TIAA advice will come in.

Thanks in advance!

--
Best regards
Han
email address is invalid

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >