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I have written before that when multiple generations work together, synergy can be created that benefits everyone. This requires the generations to work together and trust each other, but the possibilities are almost endless. Today, I want to discuss two of these techniques, both of which can increase your wealth. No, neither of them involves telling your parents to spend less so you can inherit more.

#1 Pay for Your Parents' Roth Conversion

Your parents likely have a big, fat tax-deferred account. If they're like mine, they're not even spending it very quickly. Sometimes, they don't even spend the RMDs, reinvesting them in the taxable account. Would you rather inherit a tax-deferred traditional IRA or a tax-free Roth IRA? When all else is equal, it'd be the Roth IRA.

However, doing Roth conversions has a cost, and parents often either can't or won't pay that cost. Perhaps a better use for your spare cash, which would otherwise be invested in your taxable account, would be to pay for Roth conversions of your parents' traditional IRAs. This is an especially powerful technique if some of that conversion can be done in the 0%, 10%, and 12% tax brackets. But it may still be worthwhile even in higher brackets, even if it means your parents pay more in ACA subsidies or IRMAA.

The risk with this idea is that this new Roth IRA money doesn't actually go to you when they die. Perhaps your parents need to spend it themselves. Perhaps they leave it to someone else. Perhaps you're the only one who helped pay the tax but the account is split between you and other siblings, basically meaning you are subsidizing their inheritance. Tread carefully.

More information here:

#2 Gift Appreciated Shares to Your Parent

Another tax reduction technique you might consider is to gift appreciated shares of stocks, mutual funds, ETFs, or other investments to your parents. It might even be worth giving more than the annual gift tax exclusion amount of $19,000 [2026 — visit our annual numbers page to get the most up-to-date figures]. Your parents could sell those shares at a lower cost (perhaps even 0%) and gift the proceeds back to you. Even better, they can just hold those appreciated shares in their taxable account until they die. At which point you inherit the assets with a step up in basis at death, saving tons of taxes that would otherwise be due when you later sell the shares to fund your retirement or other expenses.

What could go wrong? Well, maybe they spend the money you gave them. Maybe they give away those shares either before or after death to someone besides you. Maybe the state takes those assets at their death to repay Medicaid long-term care costs. Maybe another creditor develops a claim against those assets. There is a certain amount of risk here. How much do you trust your parents with a likely diminishing mental capacity?

 

Before doing either of these techniques, it's worth a long, frank discussion with your parents and any other potential heirs, as well as a review of estate planning documents. Even then, it might not be worth the risk. But it's something to think about if you're trying to optimize wealth across the generations.

What do you think? Would you try this? Why or why not?