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One day a forward-thinking couple arrived in my office with a plan. They wanted to bequeath the bulk of the money in an IRA to their two children, and they also wanted the children to receive that money tax free.
Nice idea, so together we set about crafting a strategy that would help make it happen.
Here’s how: Bit by bit, we are converting money from their traditional IRA into a Roth IRA. Each year we will make conversions, but doing so while being careful in any given year not to bump the couple above their 24% marginal tax bracket, which for 2021 is up to $329,850 in taxable income for a married couple filing jointly.