The Wait and See Family Foundation: A Flexible Strategy for Maximizing Wealth and Philanthropy

For high-net-worth individuals with significant IRA and qualified retirement plan assets, balancing tax efficiency, family wealth preservation, and charitable giving can be a challenge. The Secure Act 2.0 has created new obstacles, particularly for non-spouse beneficiaries, who now face a 10-year forced distribution rule that can significantly erode inherited wealth through taxes.

However, the Wait and See Family Foundation strategy offers a flexible, tax-efficient solution that keeps options open while ensuring both family and philanthropy benefit.

Jocko Willink once said, "Complexity is the enemy of execution." While wealthy clients often have complex financial and estate planning challenges, the process of addressing these issues should be clear and actionable. Over three decades, we have developed a proven process working with private wealth and family office advisors to simplify decision-making while maintaining flexibility and tax efficiency.

The Problem: IRA Wealth and the Secure Act’s Impact

The Secure Act 2.0 eliminated the stretch IRA for non-spouse beneficiaries, forcing them to withdraw inherited IRA assets within 10 years. This acceleration of distributions creates higher tax exposure, often when heirs are in their peak earning years.

• A $1M IRA passed to children could lose 40%+ to taxes, reducing the net inheritance to approximately $600K.
• Naming a charity as the IRA beneficiary eliminates tax liability but disinherits heirs.
• Wealthy clients need a strategic plan to balance wealth preservation and philanthropy.

A Smarter Approach: Keeping Options Open

The Wait and See Family Foundation strategy provides a way to manage IRA assets with flexibility:

1. Allow IRA/401(k) Assets to Continue Growing – Maintain tax-deferred growth while keeping control.
2. Name Spouse as Primary Beneficiary – Ensures tax-deferred rollover and preserves flexibility.
3. Name a Donor-Advised Fund (DAF) as Contingent Beneficiary – If the spouse predeceases, the IRA transfers tax-free to the DAF, funding charitable causes instead of triggering forced taxable distributions.
4. Use Incremental Wealth to Fund a Second-to-Die Life Insurance Policy – Provides heirs with a tax-free replacement of the IRA value, mitigating the impact of the Secure Act.
5. Leverage Flexible Premium Design – Life insurance funding can be structured to align with IRA distributions, optimizing cash flow and preserving liquidity.

By following this structured process, clients can make informed, strategic decisions without committing to an irrevocable plan. Unlike traditional estate planning decisions that may feel final, this approach allows families to adapt, adjust, and optimize their wealth strategy over time.

A Holistic and Tax-Efficient Outcome

This approach integrates estate, tax, and philanthropic planning into a seamless strategy:

• 100% Tax-Free IRA Transfer to Charity – The donor-advised fund (DAF) or charity pays zero taxes on IRA assets.
• Tax-Free Life Insurance Benefits for Heirs – Structured properly, life insurance proceeds replace the lost IRA wealth without tax burdens.
• Low Tax and Legal Costs – The strategy minimizes unnecessary legal complexities while maximizing tax benefits.
• Flexible Funding Options – Life insurance premiums can be adjusted over time to match IRA distributions, creating a seamless funding approach.
• Charitable Deductions May Reduce Lifetime Tax Liability – Contributions to a DAF can provide current-year tax benefits.

A Transformational Outcome:

• Families preserve their wealth rather than losing 40%+ in taxes.
• Charities receive substantially larger gifts that might not have otherwise been possible.
• Clients retain control, flexibility, and peace of mind in their legacy planning.

The Wait and See Family Foundation strategy ensures clients can make informed, flexible, and tax-efficient decisions about their wealth. By leveraging donor-advised funds, spousal rollovers, and life insurance, wealthy individuals can maximize their family legacy while making a meaningful philanthropic impact.

Our process, developed over three decades of working as a resource for private wealth and family office advisors, ensures that even the most complex issues are addressed with sophistication and clarity.. Advisors who embrace complexity and provide sophisticated, low-risk, high-value solutions differentiate themselves from those who rely on conventional, transactional approaches.

For more information, visit Apogee Capital Resource Group to learn how we support advisors in guiding their private wealth clients and family offices through complex financial decisions with clarity and confidence.

Disclaimer

This content is intended for financial, tax, and legal professionals and should not be considered individual tax or legal advice. We collaborate with advisors, CPAs, attorneys, and other professionals to ensure proper implementation of wealth and philanthropic strategies. Clients should consult with their own qualified professionals before making financial, tax, or legal decisions.