By Mike Miles
April 14th, 2011 | Uncategorized
Q: I will inherit approximately $40,000 because of the death of a family member. What is the best way to get this money into my Thrift Savings Plan account?
A: If these funds are not already in a traditional individual retirement account or other eligible tax-deferred retirement plan account, you can’t add them directly to your TSP account. You could use these funds to support a higher regular contribution rate, if allowed, to your TSP or a traditional IRA. As long as the IRA contributions are tax-deductible, you can transfer the funds into your TSP account later.
December 13th, 2010 | Uncategorized
Q: I am a Civil Service Retirement System retiree. What happens to my Thrift Savings Plan account after my death? My notes from a retirement seminar 10 years ago say that if my spouse is listed as my beneficiary, she may move my TSP funds into her individual retirement account with no tax or penalty. If my children are listed as beneficiaries they do not have the same option, and in most cases the TSP funds are fully taxable. Is this still correct?
A: Your spouse may transfer the balance to an IRA and avoid current taxation or may, under certain circumstances, convert the balance to a Roth IRA. Your child-beneficiary may transfer their share of the balance to an Inherited IRA to defer tax under special rules. You can learn more by reading the booklet here.
June 14th, 2010 | Uncategorized
Q: I am just about to retire from the FBI, where I’ve worked for 30 years. My parents left me a stock portfolio which dates back several decades. I would like, after retiring, to find and purchase a home using the stock portfolio, which is held in a trust my parents set up for me. I have never purchased a house, and I am wondering if there is any way to get around the capital gains taxes that probably would eat up huge chunks of the value of the stock portfolio once I liquidate most of the stocks to purchase the residence.
A: You should consult a certified public accountant or other qualified tax adviser for specific advice, but I can tell you that, unless you inherited the appreciated property (investment securities) in 2010, your basis in these securities is likely their value around the time they were inherited, so the taxable gain that existed up to that point is erased. If you inherited the stocks in 2010, a different set of rules apply (so far) and you may have inherited the basis, along with the securities.