cashing IRA's

[jnkbell]

What is the name of your state (only U.S. law)?
california

My in-laws have both been moved into an asst living facility - as of January 2010.

Combined income with pensions and SSI is approx 30k per year. Their cost with asst living housing, medical, etc., will approach 100k this year.

We have been paying with their savings, some cd's cashed out. I spoke with my CPA, not theirs, and told him they have 2 IRA's, some annuities, etc., and he suggested I cash out the IRA's first, as even though cashing the IRA's there will be taxes owed, as long as their income even with the IRA will be less than their outgoing, they will be able to write of the taxes completely and still owe nothing, and it would be more beneficial tax-wise as their regular savings acct's is money already taxed.

I do know in Ca you can write off asst living expenses, yet I don't know if IRA's fall into a different set of rules.

Is this correct and or good advice?

 

[davew128]

It sounds like someone doesn't know what an IRA is.

 

[LdiJ]

What is the name of your state (only U.S. law)?
california

My in-laws have both been moved into an asst living facility - as of January 2010.

Combined income with pensions and SSI is approx 30k per year. Their cost with asst living housing, medical, etc., will approach 100k this year.

We have been paying with their savings, some cd's cashed out. I spoke with my CPA, not theirs, and told him they have 2 IRA's, some annuities, etc., and he suggested I cash out the IRA's first, as even though cashing the IRA's there will be taxes owed, as long as their income even with the IRA will be less than their outgoing, they will be able to write of the taxes completely and still owe nothing, and it would be more beneficial tax-wise as their regular savings acct's is money already taxed.

I do know in Ca you can write off asst living expenses, yet I don't know if IRA's fall into a different set of rules.

Is this correct and or good advice?

Its iffy advice.

In CA you might be able to write off assisted living expenses but federally you can only write off the portion of the expenses that are medical expenses. You cannot write off the portion that are living expenses...on top of that you have AMT to consider.

Therefore, there could definitely be a tax bite federally. I would certainly advise a client to take the required minimum distributions, or to take the equivalent of required minimum distributions from the IRAs, but I wouldn't advise a client to take all of shortfall from the IRAs. It could deplete funds, with taxes, that they may need.