Wednesday, 03 February 2016 00:06

Secrets of the Rockefeller Trust, Roth, and Multi-Generational IRAs

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These are very advanced planning tools that are very different from what 99 percent of individuals use. Ed Slott, the nation’s most quoted expert on advanced IRA strategies, says that at most 2% of CPAs specialize in advanced IRA strategies and very few attorneys understand these strategies.

A Revocable Living Trusts’s (RLT) main benefit is that assets placed in the trust avoid the probate process. When one dies, assets not inside a RLT can take 1-2 years to go through probate court. This allows the public to know about the assets of the deceased and to place a claim for money, whether justified or not. Especially for a deceased who had extensive business dealings, this can hold up distribution of the estate to the spouse and kids for a long time. One huge surprise to most families who only have a RLT is that there is NO asset protection at all against divorce or lawsuits.

The main benefit of a Rockefeller Trust is estate tax savings and asset protection. John D. Rockefeller was the person who controlled up to 90% of the oil refining industry and was known as the wealthiest man in the world. The Rockefeller family set up hundreds of these RTs to allow transfers of vast family wealth from generation to generation without estate tax. If a kid, grandkid, or great-grandkid got divorced or sued, the spouse or plaintiff could not get any assets protected in the RT. From 1991-97, Fife Symington was Governor of AZ. He was convicted of 7 counts of bank fraud on September 4, 1997, involving his real estate development business. Yet, his family assets had been protected because his family had set up Rockefeller Trusts.

What is a Roth IRA and how does it differ from a Traditional IRA (TIRA)?

When one deposits money, such as the current limit of $5,500/year into a TIRA, one gets to deduct it. Any earnings do not have to be reported each year, unlike earnings from virtually any investment that is not held by a TIRA. When one takes money out to spend, it’s taxed 100% as ordinary income because it’s really deferred wages from your job or profits from one’s business. Also, when one turns age 70.5, the IRS forces you to distribute an increasing amount each year, called a Required Minimum Distribution (RMD), so that they can finally tax you. With a Roth IRA, you get no deduction when the funds are deposited, but if you follow the rules, there is NO tax for up to 3 generations. In addition, there is no RMD during the original Roth IRA owner’s life.

How does a Multi-Generational IRA (MGIRA) differ from traditional IRA planning?

For most people, the moment the IRA owner dies, all the money gushes out to the beneficiaries, typically the spouse or kids. If there’s $500,000 in an IRA and only one child who receives it, it adds to their taxable income that year. That normally means at least a 40% tax rate, when one combines Federal and State taxes. If they do not take that $500,000 as part of an inherited IRA; OR if the IRA was not properly set up as a MGIRA, they will lose $200,000 in taxes. With a MGIRA, the total income is paid out over the beneficiary’s life expectancy, and can multiply to double, triple, or more than what would have been received.

Summary: there is a world of advanced planning strategies that can multiply family income and wealth and reduce or eliminate income and estate tax.

Please contact Dr. Wong for a consultation at (480) 706-0177

Read 663 times Last modified on Wednesday, 14 November 2018 16:07

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