Ira Spousal Gift

[Nashville]

Older couple recently got married, and agreed to share all earthly holdings. They are in the process of converting
all properties to "joint."

Gene, over 60 yrs old, has a $200,000 IRA, and there is no way to make this a "joint" IRA. Can he, however, SPLIT
this by taking $100,000 out and giving a $100,000 IRA to his wife without it being considered a taxable distribution?

Note: this is not the same as a court-sanctioned award in a divorce settlement.

[Gary2]

No. Best he can do is to designate the new spouse as beneficiary, or bite the bullet, take it out (all at once or over time), and pay the tax due.

[ChEAr$]

I have an older, over 65 couple, who back when they were working managed it this way.
He wanted to transfer assets to new wife's name, so my advice was for him to take his RMD each year,
which would be taxable on their joint return of course, but she would then take up to 6,000 of it
and since she otherwise qualified, contributed to her own IRA. Thus her deduction canceled his taxability.

Nice wash, wasn't it?

[Nashville]

Earned Income

The wash works fine, except in this case neither the husband nor the wife has no earned income.

This does not prevent a "spousal" IRA. I'll look into that, but I think one of them must have earned income...

[ChEAr$]

The wash works fine, except in this case neither the husband nor the wife has no earned income.

This does not prevent a "spousal" IRA. I'll look into that, but I think one of them must have earned income...

Right. No earned income, no contributions to any IRA.

[ATSMAN]

If they were my client I would recommend they see an Estate Planner also? They need to protect those assets should one of them or both end up in the nursing home.

I have seen too many older folks get creamed due to lack of proper and timely planning.

[Snaggletooth]

You are exactly right

Atsman, you are exactly right. In fact, I have a good tax attorney in a nearby town that I recommend. Not terribly expensive either.

But instead, they choose a Stockbroker for their financial estate planning. Generally works for a huge insurance company or brokerage firm that sucks my clients dry with fees.

And then they go to a lawyer for asset protection, and this generally results in miserable tax fallout upon death. Then when I tell them about the mistakes, all I hear is "Mr. Burbank told us we're going to be OK and he's a LAWYER" implying that the lawyer knows more about taxes than we do.

One example is an older couple who paid $500,000 for land, sold it to heirs, and financed it. They thought the loan idea from the lawyer was brilliant because it avoided gifting. No mention of imputed interest or the fact that the installment loan will be IRD upon death. Ridiculous.

[ATSMAN]

I have seen other attorneys recommend that also when the older couple has an estate tax/gift tax problem.

If there is expensive real estate (commercial buildings etc.) I have seen them sell it to the heirs and then carry the financing at below market rates. Sure there is interest income while they are alive and IRD upon death but they figure it will be less overall than the estate tax.

[Snaggletooth]

But How

The unpaid balance of the loan is an asset held by the parents upon death.

How is this not included in the estate?

[ATSMAN]

Uncollectable debt may be?