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Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review April 11, 2005 / 2 Nisan, 5765

How can I avoid a taxing legacy?

By Jan L. Warner & Jan Collins


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http://www.JewishWorldReview.com | Q: My wife and I are comfortably retired and are in our 70s. We own one home in a small town and another in the mountains, and both are paid for. The bulk of our assets are in a brokerage account, with the vast majority being in IRAs that I rolled over from my 401(k) when I retired. We have two children, both of whom are professionals. Thankfully, our health is good and we purchased long-term-care insurance years ago.

We don't have a taxable estate, and don't expect one. However, no one knows what will happen to the estate tax laws by 2010, and we want to give a large part of what we leave to our church and a couple other favorite charities. Eventually, we want to downsize into one home, and can't decide which. We're wondering about leaving one of our homes to the charities and our other assets to our children, when the second of us dies. Is this a good way to handle things?

A: It looks as if you have done your homework, and transferring your 401(k) into IRAs made sense because many 401(k) accounts are inflexible and not the best vehicles for intergenerational planning. While many couples want to make charitable contributions when the last spouse dies, a large percentage of folks don't leave the "best" assets to the charities. In your situation as you describe it, we believe that you're leaving the wrong assets to the charities.

Assets such as homes, stock accounts and bank accounts were acquired with "after-tax" dollars — meaning that you have already paid taxes before you acquired them. On the other hand, 401(k) accounts, IRAs and other deferred accounts contain "pre-tax" dollars — meaning that you have not paid income taxes before acquiring them and, when the funds come out too fast or in the wrong hands, the income taxes can be significant. But this can be avoided.

Since IRAs do not receive a "step-up" in basis (fair market value of the assets) at death like real estate and stocks, when you make a charity a beneficiary of an IRA when the second of you dies, the IRA proceeds that go to the charity will not be taxed (assuming, of course, that the charity is one that is qualified as a tax-exempt entity by the Internal Revenue Service). Most churches will qualify, but it never hurts to check.

Since your homes and other non-qualified assets will pass to your beneficiaries with a stepped-up basis — meaning the fair market value of the assets at the time of death — there should be no capital gains taxes due should your surviving spouse or children sell the assets at the same fair market value established at the time of death.

Thus, by giving the tax-deferred assets to the trust and the assets with increased cost bases to your children, significant taxation can be avoided, even if you don't have a taxable estate.

In addition, if you do not name your children as contingent beneficiaries at the time the second of you dies, the balance of the IRAs will pass to the survivor's estate, an event that will require total distribution to your children over five years rather than their respective life expectancies. This would mean significantly more income tax that could have been saved.

Depending on your estate tax situation, because no one knows what will the law will be in 2010, you can use a trust with your wife as beneficiary in order to defer estate taxes until the death of the second spouse. And, if you don't want to give your children free access to the IRA funds, you can establish an IRA trust with your children as beneficiaries and allow only yearly disbursements of the required mandatory distributions. This means that your children will not be able to invade the IRA.

Because of the complexity of these issues, you should seek out a competent lawyer with tax experience to guide you through the maze of rules and regulations.

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.

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