Author Topic: How to Make It Fair?  (Read 839 times)

IslandFiGirl

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How to Make It Fair?
« on: December 15, 2020, 09:15:37 AM »
When my Mom died a couple of years ago, my oldest kid (an adult) was the beneficiary on one of her IRA accounts.  While the amount in the account isn't HUGE, it does have the potential to grow a lot over her lifetime.  I'm almost 100% certain that my Mom meant to leave the account to me and have my daughter as the back up beneficiary, but she entered our names in the opposite order.  (I'm not at all upset about this, just know she was a tad scatterbrained and meant to leave everything to me, then I would leave everything to my kids.)  The problem I'm running into is that I have 2 other kids who got nothing, they don't even know about my oldest kid's inheritance, but I would like to make it even.  This money will clearly give my oldest kid a leg up in starting her adult life and be a nice cushion for her for years to come.  I've been racking my brain trying to come up with a way to give the other kids the same amount of money with the same potential for growth.  The only idea I have so far is to make it happen at roughly the same age that my daughter got her inheritance.  I really don't want to just hand over cash...so, any ideas?  Thanks!

v8rx7guy

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Re: How to Make It Fair?
« Reply #1 on: December 15, 2020, 09:21:42 AM »
When my Mom died a couple of years ago, my oldest kid (an adult) was the beneficiary on one of her IRA accounts.  While the amount in the account isn't HUGE, it does have the potential to grow a lot over her lifetime.  I'm almost 100% certain that my Mom meant to leave the account to me and have my daughter as the back up beneficiary, but she entered our names in the opposite order.  (I'm not at all upset about this, just know she was a tad scatterbrained and meant to leave everything to me, then I would leave everything to my kids.)  The problem I'm running into is that I have 2 other kids who got nothing, they don't even know about my oldest kid's inheritance, but I would like to make it even.  This money will clearly give my oldest kid a leg up in starting her adult life and be a nice cushion for her for years to come.  I've been racking my brain trying to come up with a way to give the other kids the same amount of money with the same potential for growth.  The only idea I have so far is to make it happen at roughly the same age that my daughter got her inheritance.  I really don't want to just hand over cash...so, any ideas?  Thanks!

Tough situation.  Can you give us an idea of how much we are talking here?  You say not "HUGE", but $10K, $50K, $100K??  That might help with recommendations.

bbqbonelesswing

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Re: How to Make It Fair?
« Reply #2 on: December 15, 2020, 09:26:18 AM »
I don't think you have any right to adjust the terms of your mom's will after her death. If she left that money to your daughter, it's hers. It doesn't matter what you think she "meant" to do.

If you want to give the other two kids a similar amount of cash, put it into an account for each of them and leave it at that.

IslandFiGirl

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Re: How to Make It Fair?
« Reply #3 on: December 15, 2020, 09:35:28 AM »
Tough situation.  Can you give us an idea of how much we are talking here?  You say not "HUGE", but $10K, $50K, $100K??  That might help with recommendations.
[/quote]

It's about 30K

IslandFiGirl

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Re: How to Make It Fair?
« Reply #4 on: December 15, 2020, 09:37:51 AM »
I don't think you have any right to adjust the terms of your mom's will after her death. If she left that money to your daughter, it's hers. It doesn't matter what you think she "meant" to do.

If you want to give the other two kids a similar amount of cash, put it into an account for each of them and leave it at that.

I'm not trying to TAKE any money away from the daughter that received money from my mom, I just want to GIVE money to my other kids who did not get anything because I would like to make it fair, as I received money from my mom.  I'm just trying to figure out a way to do it that is just as beneficial to the other 2, as an inherited IRA has a lot more potential to grow than anything else that I can think of to give them.

yachi

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Re: How to Make It Fair?
« Reply #5 on: December 15, 2020, 10:08:46 AM »
Don't inherited IRA's have minimum distributions that kick in right away? 

You could put money in 529 plans, or open a brokerage account in their names and put it in there.  The IRA doesn't provide the growth, it's the stocks or stock funds you invest in inside the IRA that provide the growth.  If those stocks or funds throw off dividends, the IRA keeps those from being taxed until you take the money out of the IRA.

Watchmaker

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Re: How to Make It Fair?
« Reply #6 on: December 15, 2020, 10:12:34 AM »
How old are the kids?

You could give your other two kids money to be invested in an IRA once they start earning income. Note what the inherited IRA is worth when you oldest turns 18, and roughly match that amount in gifts to the other two.

v8rx7guy

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Re: How to Make It Fair?
« Reply #7 on: December 15, 2020, 10:14:24 AM »
How old are the kids?

You could give your other two kids money to be invested in an IRA once they start earning income. Note what the inherited IRA is worth when you oldest turns 18, and roughly match that amount in gifts to the other two.

That's what I was thinking too.  Problem is that if it's $30K-$40K or more by that point, that's a decent chunk of money that the OP would have to come up with!  That's why I was hoping that the inherited IRA was $10K or something lower... to make things easier.

Watchmaker

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Re: How to Make It Fair?
« Reply #8 on: December 15, 2020, 10:19:26 AM »
How old are the kids?

You could give your other two kids money to be invested in an IRA once they start earning income. Note what the inherited IRA is worth when you oldest turns 18, and roughly match that amount in gifts to the other two.

That's what I was thinking too.  Problem is that if it's $30K-$40K or more by that point, that's a decent chunk of money that the OP would have to come up with!  That's why I was hoping that the inherited IRA was $10K or something lower... to make things easier.

Yes-- it would be good to mentally set aside some funds for this now, if available, so they can grow alongside the IRA. But if done this way OP would at least get to spread out the additional funds over several years, since they would be bounded by the IRA limit.

simonsez

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Re: How to Make It Fair?
« Reply #9 on: December 15, 2020, 10:26:55 AM »
Don't inherited IRA's have minimum distributions that kick in right away? 

You could put money in 529 plans, or open a brokerage account in their names and put it in there.  The IRA doesn't provide the growth, it's the stocks or stock funds you invest in inside the IRA that provide the growth.  If those stocks or funds throw off dividends, the IRA keeps those from being taxed until you take the money out of the IRA.
Wow, thanks for bringing that up about the inherited IRAs.  I learned some new tidbits in there especially with the SECURE Act.

https://www.schwab.com/ira/inherited-ira/withdrawal-rules
Roth vs traditional, spouse vs non-spouse, age 70 1/2+ vs younger, and before or after Jan 1, 2020 all matter a great deal.  Even after that there are still various options for distributing it seems. 

yachi

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Re: How to Make It Fair?
« Reply #10 on: December 15, 2020, 11:46:43 AM »
Don't inherited IRA's have minimum distributions that kick in right away? 

You could put money in 529 plans, or open a brokerage account in their names and put it in there.  The IRA doesn't provide the growth, it's the stocks or stock funds you invest in inside the IRA that provide the growth.  If those stocks or funds throw off dividends, the IRA keeps those from being taxed until you take the money out of the IRA.
Wow, thanks for bringing that up about the inherited IRAs.  I learned some new tidbits in there especially with the SECURE Act.

https://www.schwab.com/ira/inherited-ira/withdrawal-rules
Roth vs traditional, spouse vs non-spouse, age 70 1/2+ vs younger, and before or after Jan 1, 2020 all matter a great deal.  Even after that there are still various options for distributing it seems.

I think it counts as a student asset against financial aid if that's a consideration for you.  I actually think a Vanguard ETF in a Fidelity or Etrade brokerage account could be better.  Yeah they'll have to declare the dividends yearly on their taxes, but they won't have minimum distributions like your oldest kid.

I've thought about how to "evenly" give money to my children, and it's harder than it seems.  My oldest has a 529 plan that more than doubled: we put money into it from 2008 to 2010 or so and then stopped.  Would even be the same amount put into an account at the same age, or would I match what's in the account the day she turns a certain age.  I'm following the retirement account order that gets posted here from time to time and don't have everything filled up.  At this point, it's mostly a mental exercise.