Okay, so the distinction that you need to make here is that there are two different sets of rules. So, qualified charitable distributions are made possible by one set of laws, and that set of laws still says age 70-and-a-half. RMDs used to be required at age 70-and-a-half as well, but that has changed. In fact, you know, the age is gradually going up to age 75, depending on what year you’re born, which is a perfectly reasonable explanation about why Maryland’s confused here. It depends on exactly when your birthday is. Now, on your brokerage account, or if you just Google it and use a reputable RMD calculator, you can punch in your birthday, you can punch in the birthday of your beneficiary, and it’s going to tell you exactly when you need to take distributions. Now, the amount of the distribution is going to be unknown at this point in time because it’s going to be calculated off your year-end account value in the year before you’re required to take the minimum distribution. So if I use a calculator right now, for October 27, 2024, it looks like you would have to take your first required minimum distribution— that’s something different than a QCD— you would have to take your required minimum distribution before the end of 2027. Now, you know, that gives you a different deadline whenever you’re looking at the QCD. It’s truly age 70-and-a-half. So if your birthday is in April 1954, then you would have to wait until after your birthdate plus six months in the year 2024. So it would be toward the end of October as you suggest. So good question. Yep. Good stuff.
Mark and Lisa are up next. Mark is 63 and says, “Do we have to withdraw the money from a non-qualified investment account within 10 years? Or at the time the original owner was required to take RMDs? Basically, what are the requirements, if any?” None. Great rapid-fire Friday question.
So, you know, when we’re doing estate planning, we always want to look at the types of assets that you have because there are great assets for people to inherit. And any asset is desirable to inherit, I’ll just say that, but some are more desirable than others to inherit. The one that is desirable to inherit is the one that you described here, in a non-qualified investment account, unless, of course, it’s an annuity because annuities have kind of the same tax rules as IRAs do. You are potentially going to have to pay some capital gains tax on the increase of that there. So in a non-qualified investment account, the cool thing about that, at least for the time being, is that you get a step-up in cost basis on those assets. So I was recently talking to some people who, you know, the lady is in her 90s, and she’s got some considerable gains in her portfolio, and her kids are going to be the heirs to that.
So, you know, the neat thing about the step-up in cost basis is that when those assets pass to the children, they inherit the money and assets, but they don’t inherit their parents’ cost basis. So the cost basis steps up to whatever the current value is on the day that it passes. So they get a new cost basis. Theoretically, if they were to sell all of the assets, logistically speaking, it probably cannot happen in this way because you have to wait on a death certificate to get the paperwork process rolling. But as soon as you get those new accounts open and the assets transfer into those accounts, you’re able to sell them. And when they transfer into the accounts, most brokerages will actually carry over the new cost basis for you. It will show you. So, you know, if you own 100 shares of stock at $10 a share and the cost basis was, say, $5, when the heirs inherit it, they get the cost basis of $10, whatever it is on the day that the current owner passes.
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