With Trump’s signature the SECURE Act was passed and with that, the death of the popular estate planning strategy the Stretch IRA.
In the “good ol’ days”:
Before the SECURE Act, you could leave your large IRA to a much younger beneficiary, for example a grandchild. The benefit of doing that was that the payments were then basically stretched over the grandchild’s lifetime. The lifetime of a grandchild is obviously expected to be a lot longer than that of the grandparent. As a result the tax benefit of the IRA lasts much longer too. By doing this, You’re shielding capital gains and income on the investments from tax for decades longer. Pushing out those tax payments, secures your wealth, and potentially helps it grow, for much longer. (Forbes 2019).
What the SECURE Act means for you now:
Now, a provision in the SECURE Act will force a non spouse beneficiary(s) to withdraw the entirety of the IRA within ten years. In other words, the non spouse beneficiary(s) would suffer major tax consequences over those ten years and would end up losing a big chunk of the account to the IRS in taxes.
We’ve seen a few prominent (and exhausted) strategies that financial advisors are offering for their clients, that again, has us pulling our hair out in frustration because they all still result in A HUGE LOST OPPORTUNITY COST/TAX CONSEQUENCES for your heirs. We’ve quickly highlighted and shown each strategy and the lost opportunity cost.
1). Converting the large Traditional IRA into a Roth IRA: In order to achieve this strategy, one needs to take a hit on the value of IRA because it would force the account holder to pay the taxes now in order to open a Roth IRA account that would grow over time tax-free for their heirs. There is a common misconception that the IRA will cover the tax liability of converting. That is simply not true. You will have to pay out of pocket, with non-IRA funds to cover the tax liability of converting that IRA. For instance, if you have $1,000,000 in an IRA which has up to a 40% tax bracket, then said IRA would have a tax liability of around $400,000. $400,000 paid and out of pocket and lost! Forever! The lost opportunity cost of choosing this strategy is enormous and unfortunate for your heirs and your hard earned money. Learn more about a real life example that Lasaii Benefits encountered with this strategy here:
2). The Charitable Remainder Trust: This strategy does not provide tax-write offs.
3). Life insurance: The IRA account holder could purchase life insurance with the distributions into life insurance, but would also not receive any tax write-offs, and therefore he or she would still be losing a big chunk of money to the IRS in taxes.
What if you could integrate your IRA with real estate that you and your family could occupy and/or use to create income?
You can with Lasaii Benefits: IRA Real estate to Occupy’s proprietary program that offers a better strategy by using those ten years to invest the funds to help purchase real estate that you and your family can occupy and/or use to create income with the SAFE HARBOR®-Directed IRA™ (SHIRA™).
Our proprietary program allows for occupancy of the real estate by direct family members because the title of the real estate is in your name, not in the name of the IRA. Therefore, there are no prohibited transactions with the SHIRA™!
With Lasaii’s creative solution, the tax liability of taking those distributions over the ten years would either be completely offset or minimized because of the tax benefits (if you qualify) associated with owning real estate.
Our IRA real estate program also has the benefit of Step Up in Basis, therefore at the death of the donor the heirs would inherit the real estate at it’s appreciated value with no tax consequences to them whatsoever.
The SHIRA™ offers choices in what type of real estate to invest in, such as, a primary residence, vacation home, investment property or commercial real estate.
BONUS: If you are a charitable-minded individual, you could instruct your heirs to donate the real estate after the tenth year to a charity of your choice and receive that tax write-off as well.
tax benefits of real estate ownership
the Step Up in Basis to heirs
the potential appreciation of the real estate
the protected principal and leverage as well as the possible interest earnings of the SHIRA™
rental income payable directly to you that the real estate could provide
you would also be leaving your family with a tangible legacy and a solid foundation to build family memories because of the intrinsic value of occupancy that our SAFE HARBOR®-Directed IRA™ offers.
Start 2020 With Our Innovative Strategy
We specialize in helping clients structure customized, tax effective IRA Real Estate to Occupy investments that enhance their portfolios, lifestyles, market positions, and legacies.
Since 1992, Lasaii Benefits have been the leading experts in the IRA Real Estate to Occupy Industry.
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