RMD - good or bad idea?

Squirl

Squirl

New Member
Location
Las Vegas, NV
Well, I turned 70 in the first Q of 2019 so have to take an RMD from a couple of IRA’s. One of them will net me about $4200 —and its an inherited IRA from my late husband (died 20 years ago). Thinking of pocketing the tax amount I will have to pay and distributing balance to my late husband’s daughter (50%) and his deceased other daughter’s 2 adult children (25%/25%) and just tell them its proceeds of an old investment of his and I knew he wanted his girls to get the money even though I am the beneficiary.

Am I opening a Pandora’s box? I don’t want to set them up to expect money every year. And I don’t want them to have suspicions that there are assets (there are not) from his old will that were for them but not disclosed. FYI, all are doing ok financially. I stay in touch with my stepdaughter but not the other 2 grandkids; I just really don’t need the money and they are all raising kids.
 

Are they close enough to sit down & explain the same things you just explained in your post.?
More importantly. Do you have the confidence or kind of relationship with them that they will understand & accept what you tell them?
 
If they don't need the money, will they appreciate it? Doubtful. Have you considered a charitable donation in your husband's name to maybe something like St. Jude's or the SPCA? Homeless shelter, food pantry and soup kitchen are other places that would appreciate a lift at this time of the year.

As you can tell, I am somewhat reluctant to "give" money to someone who has no need for it and will just add it to their already large sum of cash. I give money for one reason; it's needed.

But, it's your money, so do with it what you want.
 

I have a good relationship with all; however I live far away so would just be sending checks. My concern is my late husband’s ex-wife (mother/grandmother to these potential beneficiaries) has always had her hand out.....
 
If you don't need the money and don't want it, that is a generous thing to do, why not do it yearly. If you don't want to do it yearly, say it's a one-time gift. As to the will, you can always make a copy of it and give it to them. I think you're a great lady for wanting to do this since you're not required to do it.
 
Squirl said:
I have a good relationship with all; however I live far away so would just be sending checks. My concern is my late husband’s ex-wife (mother/grandmother to these potential beneficiaries) has always had her hand out.....
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Once it's theirs, it's theirs. If you're going to worry about them giving it to their mother, don't bother giving it to them, although I think that should be none of your concern.
Now that I think about it: What are you going to do, give it to them with an admonishment to not give it to mom? Are you going to constantly check to see if they did? Nonsense, that!
 
Oh, that’s not what I meant. What I should have said is she may encourage them to have this expectation going forward and/or plant a seed that there may be other assets for them. She actually lives with my stepdaughter. She (the ex, not her daughter) has always had money troubles. I don’t want to commit the RMD to them each year because who knows over the 27.5 year distribution formula what, down the road, I may feel I need of this money. Likely I will never need it, but I just cannot predict the future.
 
Truthfully, I do think you'd be opening Pandora's box. When it comes to money, people can think and act in crazy ways. They might think you've been holding out on them and yes they might expect you to give them something every year (or more often), there might be a squabble about the percentages each one gets or they might just be ungrateful. If their mom is struggling, maybe they would give some of it to their mom.

When there's more than one person (other than yourself) involved things can get very messy. If you don't need the money and have your brokerages/bank (or whoever holds the IRA(s) send your distribution directly to a charity of your choice (mine is St. Jude's), you will not be taxed on that distribution and your money will wind up where you know it will do some good. I check charities in Charity Navigator to be sure most of their money gets distributed to their causes, not administrative and other expenses.

I posted this in the Financial section the other day..tax tips for RMD distributions. The article in the post also contains information about inherited IRAs.
https://www.seniorforums.com/threads/required-minimum-distribution-rmd-tax-tips.44862/
 
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Squirl said:
Oh, that’s not what I meant. What I should have said is she may encourage them to have this expectation going forward and/or plant a seed that there may be other assets for them. She actually lives with my stepdaughter. She (the ex, not her daughter) has always had money troubles. I don’t want to commit the RMD to them each year because who knows over the 27.5 year distribution formula what, down the road, I may feel I need of this money. Likely I will never need it, but I just cannot predict the future.
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Then you're better off NOT giving it to them, period. Once you give, you establish expectations and they feel deprived in subsequent years if they don't receive it.

That's why I'm not in favor of giving yearly advances of inheritances ($14,000), unless you're super rich. Even giving to charity. What if something happens down the road and you need that money, you can't expect those people to return the money, or expect your relatives to support you when you become destitute.
 
I think you've made a good plan Squirl. Why not pass some inheritance on to the next generation early?
We're a little younger than 70, but have been looking into converting IRAs into Roth IRAs, so that our heirs can have it sooner rather than later. We will have to pay income taxes on the IRAs that we convert, so we'll have to be careful not to cash out too much, since we're still working. Why does it all have to be so complicated? Why don't they just change it over to a flat tax and make things easy? Beats me.
 
oldman said:
If they don't need the money, will they appreciate it? Doubtful. Have you considered a charitable donation in your husband's name to maybe something like St. Jude's or the SPCA? Homeless shelter, food pantry and soup kitchen are other places that would appreciate a lift at this time of the year.

As you can tell, I am somewhat reluctant to "give" money to someone who has no need for it and will just add it to their already large sum of cash. I give money for one reason; it's needed.

But, it's your money, so do with it what you want.
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As you can see I am ambivalent; but I do know my late husband would not want this money given to charity. He would want it to go to my enjoyment of that of his kids. His greatest sadness of succumbing to cancer at age 50 was that he wouldn’t be around for his daughter and grandkids.
 
Squirl said:
As you can see I am ambivalent; but I do know my late husband would not want this money given to charity. He would want it to go to my enjoyment of that of his kids. His greatest sadness of succumbing to cancer at age 50 was that he wouldn’t be around for his daughter and grandkids.
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Okay, Squirl, you gave your own answer, the best one. Do it. (y)
 
You can't go wrong with the truth.

Tell them it's an RMD from your IRA and that because you don't really need it this year you would like them to have and enjoy it.

Another option is not to provide any sort of story/explanation just put the money in an envelope and say Merry Christmas.
 
Squirl said:
As you can see I am ambivalent; but I do know my late husband would not want this money given to charity. He would want it to go to my enjoyment of that of his kids. His greatest sadness of succumbing to cancer at age 50 was that he wouldn’t be around for his daughter and grandkids.
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That’s what I don’t understand. Not bragging, but we (wife and I) are very well off and if someone gave us money, it would be like, “ho-hum, just put it on the pile.” How much satisfaction is that? OTOH, we get a lot of satisfaction donating to the charities mentioned previously. And, it’s the right thing to do.

But, it’s your money, so do what makes you the happiest. I will add that I have lost friends and family members also too young in years. It’s sad and heartbreaking to watch them deteriorate over the months. I am sorry for your loss.
 
Thanks much, it was a heartbreaking time. And his daughter and grandkids really missed out on a loving man who so looked forward to being the best Grampa ever.....the plans he had! None of them are doing so well that even $800 wouldn’t be considered a windfall. They are doing OK. But none lives lavishly. And each of the 2 grandkids is in their 20’s with small kids.... Again, my concern is setting up expectations. And if I shared this was RMD money, I do believe, annually, they would be looking for money and maybe even planning for it.
 
There's lawyers out there for them too. That may look into it for their sakes. Especially if they need it whether old or young. Since you are doing so well on their fallout.
 

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