medium · Certified Financial Planner Investment Planning
An individual in the 37% marginal tax rate bracket holds $2,000,000 in a traditional IRA. They also hold $500,000 of stock with a basis of $50,000 in a taxable brokerage account. The client wishes to leave $500,000 to a local university and $2,000,000 to their child, who is also in a high tax bracket.
Which asset assignment is most quantitatively optimal?
- Leave the taxable stock to the charity and designate the child as the beneficiary of the entire traditional IRA.
- Sell the stock to donate the cash to the university and leave the IRA to the child to stretch over ten years.
- Execute a Qualified Charitable Distribution (QCD) of $500,000 from the IRA to the university and leave the stock to the child.
- Designate the charity as the beneficiary of $500,000 of the traditional IRA and leave the taxable stock to the child.
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