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Wealth Transfer Ideas – Think Two and Three Generations

June 01, 2017
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Perhaps your financial picture is very sound.  You think it is unlikely you will run out of money.  If you are in this situation, you may want to consider how to pass more tax effective assets to the next generation or even the one beyond.  Understanding various tax issues is essential.


Passing Traditional IRA assets burdens your heirs with paying taxes on all future distributions.  On the other hand, passing Roth IRA assets means no taxes will be owed on what you pass to your children or grand-children.   Also, for Roth IRAs, there will be no income taxes owed on subsequent growth.  Here are a few ideas to consider:


  1. If you child/children are in a strong financial position, pass their share to their children.
  2. Bite the bullet and convert a modest amount of your Traditional IRA to a Roth IRA every year.
    2. By converting Traditional IRA assets to Roth IRA assets, you assure that there are no taxes on subsequent account growth. NOTE: There are five-year-hold and age-based Roth IRA rules that you need to fully understand.
  3. Want to leave money to charity when you die? If you leave qualified charities a portion of your Traditional IRA money, they do not own income taxes on the distributions.


Your non-retirement account assets such as your individual, joint or trust accounts will receive a step up in basis upon your death.  If you paid $10,000 for an asset and the day you die this holding is worth $20,000, there is NO tax on the $10,000 growth.  This means that passing non-retirement account assets to your children and grand-children (cousins and nieces and nephews too) is very tax effective.  The same goes for your home:  no income taxes on the growth in value upon your death.


If you are in good health, wealth transfer via life insurance may be very cost effective.  Strategies around insurance can include long-term care riders that offer some financial protection in the event you need long-term care. The nature of insurance and the insurance-long-term-care combination exceeds the scope of this brief article.  Please consider our offer for a complimentary meeting.


Consider the adage:  It is not what you make that counts.  It is what you keep that counts.  This information goes a step beyond the adage.   Consider taking steps that pass better assets to the next generations. 


This is part of a series of articles on the business side of medicine from The Doctor’s Financial Resource.


Travis Flandermeyer, MBA, direct line: (505) 717-1111,


Phil Messuri, MS, CFP®, direct line (505) 798-6941,


6100 Uptown Blvd NE, Suite 610B/C

Albuquerque, NM 87110


Investment Advisor Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC.  Cetera is under separate ownership from any other named entity.  The Doctor's Financial Resource and Cetera Advisor Networks LLC are not affiliated.



Individual Retirement Accounts (IRAs)

Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.

Tax and Legal Disclaimer

For a comprehensive review of your personal situation, always consult with a tax or legal advisor.  Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.