My father (82, 4 adult children, my mother passed years ago) met with his insurance salesman (who also does financial planning) today to review some things.

He has a number of traditional IRAs, which he does not draw money from other than the required distribution each year.

The insurance guy informed him that the manner he presently has it set up will hammer us with taxes when he passes.

Do you guys have any guidance on how to best structure this?

His adviser seems to be stating that each of us should have our own IRAs set up (I already do, I'm assuming my siblings do as well), and that the money should be rolled into those upon his passing.

Does anyone have any more in depth information on how to best do this?


ETA:

In doing some basic googling, it seems that the stretch option would be best. I am 32, and while extra money is always welcome, giving as little to uncle sam as possible is my number 1 priority.

Went through this with my mom's estate, short answer is a parent's IRA can only be rolled to a spouse, not a child or any other beneficiary.

http://www.retirementwatch.com/IRASample4.cfm
and
http://www.aarp.org/money/investing/info-10-2012/how-to-handle-inherited-iras.2.html

were the best explanations I could find of how to go about keeping the tax bite to a minimum when the heir is not the spouse.

You cannot roll it into your IRA. There is no way to defer the taxes by moving it to another vehicle.  You can take a lump sum payment or you can take withdrawals based on a schedule dictated by the IRS, which should be very short.  

BTW, your dad's insurance guy is trying to sell him an annuity or an insurance policy which is a HUGE mistake.  Don't do it.  

Keep in mind that it is all a gift to you, regardless of the net amount.

At his age your father should not be taking to an insurance salesman - ESPECIALLY concerning his personal finances.  That's like letting a fox in the hen house.

I just went through this.

You can set up a 'beneficiary IRA' and transfer your portion of the funds into it after he passes.  It has to be designated specifically as a 'beneficiary IRA' and you cannot mix any after tax funds with it. You have to handle the transfer carefully to prevent the immediate tax hit.  

You will then be required to start taking an RMD the next calender year based on your age. It is not a fast schedule.  I will be required to take less than 3 percent next year.  At 32, you would have to take even less.

Google 'Beneficiary IRA' or 'Inherited IRA'.


ETA: I second the advice to keep him far, far, away from the insurance guy as a financial planner.

This is what happened to me when my father died.  Bought some Conoco with it and the dividend covers the required down draw.

doesn't sound right, id get a couple new opinions, inheritance tax doesn't start till over 5 million and even with the ira's you should only pay tax on what they earn after inheritance. if you inherit a house dad paid 80k for, worth 150k when inherited, sell for 200k later you only pay tax on the 50k difference.

An inherited IRA doesn't get a step-up in basis like other capital assets.  You will pay regular income tax on all of the distributions.

Listen to Plasticseng and the posters he agrees with.  I did exactly that when my mom died.  

Keep your dad away from the insurance guy!  His only interest in in making his boat payments.