How Can You Convert an IRA to a Roth IRA and Eliminate or Reduce The Tax Consequences?

Mike & Mary Biden, ages 75 and 73, needed personal tax advice. They currently have over $400,000 in various bank accounts earning less than 1.5%. They also have a number of IRA’s totaling $300,000. They would like to reduce or eliminate their RMD’s, as they currently have enough income from social security and their pensions to enable them to live comfortably. Their long‐term care needs have been addressed. Their unwanted RMD’s are pushing them into a higher tax bracket, and they are also concerned that their heirs would pay substantial taxes should they inherit the IRA’s.

The Tax Reduction Network suggested the following strategy as a way to support their favorite charitable work, have a future income, and create a way to re-characterize their qualified money without substantial tax consequences..

Here’s how it worked:

1. Mike & Mary funded a TRN Strategy, $200,000 of non‐qualified assets that were earning very low rates.
2. The TRN Strategy issued a Deferred Income program that will payout to them, or to their heirs beginning in 10 years (they may turn on income sooner if they need to) for 20 years.
3. Mike & Mary received an immediate income tax deduction of $94,137.
4. The Biden’s recommended that their church and their local homeless shelter receive immediate charitable grants as a result of their completed TRN Strategy.
5. The Roth conversion was elected on some of their IRA’s, utilizing the tax deduction to
off-set what would otherwise have been a taxable event.

Total Value of Assets transferred $200,000
Tax Deduction Created $ 94,137
Tax Savings @ 25% $ 23,534
Annual Income (10 yr. deferral /20 yr. payout) $ 14,283
Potential Benefit (payout plus tax savings) $ 309,194
Amount of Charitable Recommendation $ 6,000

This is one just one way of reducing taxable income.

Call now at 610-945-1954 to set an appointment.