Mother-in-law wants to put her ROTH IRA money into grandkids college fund

Nobeard

I have no idea where to go in order to help her do this. She has spoken to someone over the phone who told her to go to update.ben.rothira, that's a dead end. There a bugfuck-million different websites about ROTH IRA with all kinds of really helpful advise, but nothing I have yet found where she can actually manage it. What do?

Six

What financial institution managers her IRA? What's the name of the bank/company on the statements she gets? She should contact a representative there to go about it.

She may also want some advice on whether this is actually the best way to contribute, depending on her age and other assets.

bowen

You should talk with a financial adviser because that seems strange.

I'd see maybe setting up an investment account where she can put what she does a paycheck there instead of her IRA, because I don't think it works like that.

Nobeard

Six wrote: »

What financial institution managers her IRA? What's the name of the bank/company on the statements she gets? She should contact a representative there to go about it.

She may also want some advice on whether this is actually the best way to contribute, depending on her age and other assets.

We don't know, we don't know, yea I'd really like to do that. She's retired and her memory is starting to go. She's worried that when she dies the money in the account will be lost. She does not get any statements because she moved. We have no idea who manages her account. She's going to look through her paperwork to see what she has. She has a regular bank account with Well's Fargo, I guess that would be a good place to start.

bowen

You need to get with a lawyer too and make sure her will is in order, in that case.

Six

It's possible that it's Wells Fargo that manages the IRA, but if not it could be anyone. First thing she needs to do is figure that out - go through past paperwork and statements and see what you can find.

You may want to run a credit report from one of the three agencies at annualcreditreport.com. This won't show an IRA, but it may show loans/accounts from other institutions that might be possibilities.

Nobeard

We think we found the company that manages the account. Unfortunately, to talk to us they require a PIN number that she does not remember. So, they are going to send us a form that she needs to get notarized and send back to them, then they will issue her a pin, then they will talk to us. We gotta lot of hoops to jump through, but we will eventually get everything worked out.

Good point about the will, that definitely needs to be looked into.

I gotta say, I really don't want to be doing any of this. It was a huge headache just getting her a state ID card when her out-of-state drivers license expired. But, she's become one of my best friends in the past few years, and I'll do whatever I can for her.

tarnok

bowen wrote: »

You should talk with a financial adviser because that seems strange.

I'd see maybe setting up an investment account where she can put what she does a paycheck there instead of her IRA, because I don't think it works like that.

I spoke with my financial advisor about this recently. A Roth IRA has a couple of peculiarities that a traditional IRA does not and it can be used to pay for educational expenses without incurring tax penalties.

Definitely talk to a financial advisor if any significant amount of money is involved. Tax law is a labyrinth and the government is the minotaur that will eat you if you get lost.

tinwhiskers

I am not a cpa/cfa etc.

I think the best way to go about this would be to set up 529 plans for each of the grandkids.

Then she can contribute any taxed income she makes to those plans where it is deductible, while withdrawing tax free money from the Roth to live on.

Or she can probably just dump the Roth into them entirely, the contribution limits in 529 plans are bonkers high.


The thing to consider is that if you forsee that she might end up in assisted living. You want to protect her assets from being burned through, before Medicare stats paying for it. There is a claw back period there.

So she can't just dump thousands of dollars into the grandkids, and move into a home a week later and get Medicare to cover it. But if she put it in XX months before that time they can't go after the money.

The most common thing related to that it's getting the house deeded to a relative a couple years ahead of time.

Veevee

Nobeard wrote: »

I gotta say, I really don't want to be doing any of this. It was a huge headache just getting her a state ID card when her out-of-state drivers license expired. But, she's become one of my best friends in the past few years, and I'll do whatever I can for her.

It will be infinitely easier to do all of this now than after she passes. Now you can ask her questions and get unhelpful responses at the very least or have her sign any legal paperwork that is needed, but later that wont be an option and instead you'll have to pay lawyers to do all this work. Or even worse, find out all her money does disappear to pay for outstanding bills and other debts she may have after she passes.

I know it's a chore, and it's not one anyone looks forward to as their parents (or parents-in-law in this case) age, but it really needs to be done to make sure your mother can live the rest of her life happily and secure in the knowledge that her kids and grandkids will have those funds available to them in the future.

Cauld

Talk to a tax professional before you move any money. There are likely tax implications to taking your money out of a Roth IRA, that could maybe (possibly) be avoided if she does this the right way.

Mayabird

Is she over age 59 1/2 and is the Roth IRA over five years old? If so she should be able to take a withdrawal no problem. Whether she should or not is a different question.

Also make sure if it's definitely a Roth or if it's traditional or something else because there are tax implications. And when you can look into the account see if she has beneficiaries already set up on it, just in case.

Nobeard

She's 65+, don't exactly remember how old she is. She does not own a home, she lives with us. Well, she does own a home technically, but it's not something we are looking to sell, it's an old plantation house from the 1820's. Physically she's in relatively good health. She worked for a public school system in Georgia, so there is not some local office we can visit. The ROTH IRA is definitely over 5 years old.

Right now we just have to wait for the letter from that financial institution. I'll update as things happen. Thanks for your help!

Thundyrkatz

Maybe its time to assign a Power of Attorney? Its a lot of work, but you could take the confused old person mostly out of the paperwork part of the equation.

bowen

Yeah shifting asset management to someone is probably a good idea at this point too. Especially if she's living with you and her memory is not what it was.

Hopefully there's no other family member that wants access to her money, and she has her will in order to squash that (IE, donate everything to those kids once the estate is liquidated).

Inquisitor77

Yeah this is almost certainly a bad idea.

Djeet

If she does not want to give power of attorney she should talk to a probate attorney or estate planner to determine how the assets of her estate will be handled upon her death. It's going to cost a bit, but a simple Will is likely the least tax-efficient way of handling this. Assuming the Roth IRA is more than 5 years old, and since she is more than 59.5 years old she can just cut a check from her Roth IRA (up to whatever MM/cash reserves are there). If this is intended purely for education giving to a 529 setup for the beneficiary would be ideal. If more flexibility is desired then she can write a check to an account in the name of the child, but should be aware of the max allowed before gift tax comes into play. IANAL, and she should probably talk to one if her memory is going or in early stage dementia, so she can address this while she is as clear of mind as she will be.

wrong_button

I'm pretty sure moving earnings from a Roth to, say, a 529 plan before 65 1/2 would be considered a taxable event (ie taxes + 10% penalty). Probably not a super idea. I think Roth contributions might be a different story, depending on the vehicle. Alternately she could pay for some college-related bills that (the IRS calls them Qualified Higher Education Expenses, you can probably find a list of these on the IRS site) without getting hit.

But I'd certainly at least talk to a financial advisor (I prefer fee-based, not commission based, but that's neither here nor there) before shuffling anything - there's a lot of ways to get smacked with penalties and taxes if you aren't careful. No one likes to give away money on a clerical error.

Nobeard

I don't intend to move any money without talking to a financial advisor first. She basically came to me asking for help, and I have less than no idea how to go about it, I have negative knowledge. What I'm trying to do is simply find the right people to talk to. I did not even know if we need to speak to a government agency or a private buisiness about this. This whole thing started when she got a phone call out of the blue, talking about her ROTH IRA. God I wish I had been there for that phone call.

Djeet

No need to talk to a govt agency.

Here's all she'd (or you'd) need to know about contributing and withdrawing from an IRA. If hers is all Roth then just focus on the Roth parts.

I'd be suspect of calls out of the blue giving advice or soliciting action w/r/to how to handle retirement accounts. The elderly are particularly targeted for scams w/r/to retirement accounts, reverse mortgages and annuities.

There are 2 things going on here (that I can see): (1) she wants to fund little Johnny's or little Jane's further education (this you could conceivably figure out how to do with some research and maybe a little advice of a CPR or CFP) and (2) how her wealth, assets and possible income streams will be handled when she passes away or should she become incompetent (here's where you want an estate planner/probate attorney).