A recent Forbes article caught my eye. It was called There’s A Tax And Estate Planning Opportunity In The Stock Sell-Off. While, undoubtedly, many people have lost money in the recent stock-market downturn, it does provide an opportunity to increase the after-tax wealth of your family.
The article suggests converting your traditional IRA into a Roth IRA. With stock prices currently the lowest they have been in a long time, you have the opportunity to convert for more shares then you could have only a month ago since you are required to pay taxes on the conversion immediately.
This suggestion is even more appealing when you consider the new SECURE Act. One of the many things the SECURE Act did was require that Inherited IRAs be fully distributed in 10 years. (There are exceptions of course). Since Trusts are taxed at one of the highest tax rates, naming your trust as the beneficiary of a Traditional IRA almost guarantees your heirs will be paying taxes at the highest tax rate. Since a Roth IRA has the benefit of being tax-free later in life, you do not have this same issue if your trust is named the beneficiary of a Roth IRA.
While there are several factors that need to be considered before deciding whether to convert your IRA, and this article should not be taken as financial advice, you should not let the recent downturn in the stock market prohibit you from Estate Planning.
If you are interested in learning more about how the SECURE Act has effected Estate Planning, you can book a Complimentary Strategy Session HERE.
