Author Topic: Transferring assets tax free?  (Read 1389 times)

cchamberlin

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Transferring assets tax free?
« on: May 28, 2015, 05:17:50 PM »
My wife has about 50K in mutual funds invested in a wealth management firm (RBC) that was left to her by her grandmother some years ago. She hasn't done anything with it for about a 6 years and it is conservatively invested (40/60 stocks to bonds) at the moment. The fee is around 1% for the management of the assets and I'm looking to transfer it to a different, lower cost management company without incurring capital gains taxes. I tried Betterment, but they wouldn't be able to accept the transfer without us paying said taxes.

My question is whether or not anyone knows a good way to get these funds transferred to Vanguard without us having to pay capital gains taxes. I'm a bit of a novice investor, but I've been reading the blog for the past few months and I'm hoping someone can shine some light on this for me.

Thanks,

Chris

forummm

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Re: Transferring assets tax free?
« Reply #1 on: May 28, 2015, 06:17:37 PM »
You can probably do an in-kind transfer. She would still own those particular mutual funds, but wouldn't have to pay RBC to "manage" them.

But what are the expense ratios for the funds she owns? They are probably pretty high. How much of a capital gain are we talking here? If it's only 40% stocks, it might not be that much.

nereo

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Re: Transferring assets tax free?
« Reply #2 on: May 28, 2015, 06:29:51 PM »
Very likely you can't do it, at least not legally...

A few things you might consider:
If your wife has no earned income and you file taxes individually, then she can use her personal deduction to offset the capitol gains tax.  Doing this would mean she'd have to sell chunks of it over several years.

If the mutual fund was sold at a rate that was lower than the original purchase price, then you will not have any capitol gains tax.  This seems unlikely if it was left to her by your grandmother "some years ago".

If you somehow have some major deductions to declare on your taxes.  One way I can see this happening is for you to use the money from the sale to fully fund both of your IRAs ($11k), your 401(k)/403(b) ($18k each, or up to $36k) and HSA ($6,650).  This could qualify you for the Saver's Credit.  All this is doing is off-setting the capitol gains tax you'll pay on the sale of the $50k, and if maxing out your contributions lowers your AGI to under $74k (joint filers) you should only have to pay 5% LTCG - since its mostly bonds she probably won't have very much to pay in the first place. 
Someone correct me if I've made an error here.

The first two seem unlikely unless you meet these criteria.  The last one might be your best bet.
g'luck.