Originally Posted by
Planetrain
If a lot of that earmarked money for person #3 ultimately will go to their heirs, isn’t the brokerage account financially equal considering the heir gets a stepped up basis, negating significant capital gains?
I swing towards brokerage option due to lack of complexity, access to the money for purchases/opportunities/bailouts/security/black swans/etc between now and retirement, and the fear Roth money will be a tax-free promise for an ultimately narrow audience. Eventually Congress will figure a way to pull the football so-to-speak, and penalize high net worth Roth holders either through Medicare premium hikes, plus-ups like the Obamacare tax, investment taxes, etc. Maybe not in the next few years, but I fear it will catch up eventually. Kinda like the uncomfortableness of lower AMD thresholds being a $cary threat on the horizon of a Biden-led reelection.
A brokerage acct can have many positive benefits. Yes, you can use it now, yes it’s better on taxes, and when you pass your heirs get a reset on the basis. Big part of estate planning is determining how your assets will transfer and to who, while avoiding probate with a trust. That IRA/401K could be a tax headache to adult kids but could be a godsend to young kids. That Roth IRA can be awesome to adult kids. The brokerage acct is an amazing tool for leaving a legacy without saddling someone with a tax bill.