AAII Eastern Michigan Chapter

Recently the topic of "asset location" came up.  In particular about value of growing assets inside an IRA (not Roth) vs in a taxable account when trying to accumulate wealth for heirs.  What are your thoughts about building IRA assets which will be taxed within 10 years of their inheritance vs Buy and Hold in ETF's which will qualify for stepped up basis when the assets are inherited.  

Does anyone have thoughts about this?

It seems it will be better to hold the assets outside of an IRA.  Not only will they enjoy basis step-up upon your death, but then any future gain will be taxed at the lower capital gains rate.  Within the IRA, all distributions will be taxed as income.

The first step to think about is what are you planning for tax minimization? The two of you, the one of you, or the none of you, i.e. your heirs. From there you can start to decide what approach you want. In light of secure 2.0, the best things heirs can inherit are stepped up in basis investments (stocks, real assets etc.), Roth IRAs, and Life Insurance. All will pass tax free. If you are planning to minimize taxes for the two of you or the one of you (widow or widower) then the calculus changes.