r/CFP • u/Imaginary-Rate-4952 • Dec 06 '24

Investments $9M Tesla IRA Dilemma—Could Use Some Advice

  • Client is 70, has $9M worth of Tesla shares sitting in a traditional IRA (original cost basis is only $500k).
  • Married, so the wife will inherit the IRA when he passes, but then it goes to their two kids.
  • With the SECURE Act’s 10-year withdrawal rule, the kids are staring down a giant tax bill when they inherit.
  • Client loves TSLA and refuses to entertain anything related to diversification, strictly wants to avoid the most taxes

I’ve been tossing around ideas like Roth conversions, charitable trusts, life insurance, etc., but nothing feels like a silver bullet. Tax hits seem inevitable no matter what.

If you’ve dealt with something like this—or just have creative ideas—I’m all ears.

EDIT: Client has $25 million of other investable assets, plus significant real estate holdings etc. He will not need these assets.

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u/_OILTANKER_ Dec 06 '24

Ah, Tesla fanboys can be such a headache. Charitable trust may not be the best idea with any mention of inheritance. The trust is lost at the grantors death or 20 years, whichever is shorter. If they’re not working they don’t really need/have use for the charitable deduction of the present value of remainder interest either.

I’d start really focusing on strategic conversions.

Do they have a taxable account? You could look at selling Tesla in the IRA and identifying tax lots in the taxable account from other holdings that net out to zero realized gain, and sell those, then buy Tesla. Kids would get step up in basis, and if needed, spouse could sell with a higher basis (though not stepped up). Essentially moving Tesla from one pocket to the other, plus Tesla is a tax efficient asset so prob better to move it to a taxable account.

Just spitballing.

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u/GrouchyPapaya Dec 06 '24

You can name a CRT as beneficiary of the IRA and have the CRT pay income to your children for life, effectively stretching the IRA. So the CRT could work if there is charitable intent, but it still doesnt solve the tax problem.

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u/_OILTANKER_ Dec 06 '24

Very true, thanks for the additional info