Remember you can own more than 40 different types of assets in an IRA account. You're not limited to holding just traditional securities. Most major brokerage firms managing IRAs offer a selection of mutual funds for you to invest in but restrict your holdings to traditional securities. They are usually not equipped to handle real estate, private equities or others asset classes that the IRS permits. For instance, you can own most any type of real estate including vacation houses, boat slips, and/or commercial. You cannot, however, own any real estate that you care currently benefiting from. For example, you can own a beach house but you or your family cannot use the property during the time it's held within your IRA. But, you can rent it for a profit. Another example...you can purchase a building lot and flip it 30 days later for a profit...all legal within your IRA. You can even invest in cattle within your IRA. Banks will also lend on IRA purchases. So, it's possible to use leverage. You can expect to pay a slightly higher interest rate than if you were borrowing personally but, in some cases such as real estate, the ability to use leverage in your IRA more than justifies the higher rate. Most people are only aware of the traditional mutual fund type of investments. But, if those are doing poorly...well, you've got other choices. To invest in other types of assets, you need to open whats called a "self-directed IRA" with a custodian that allows you to invest in the full range of asset types allowed by the IRS. With a self-directed IRA, you can invest in real estate and privately held businesses, make secured loans (such as a mortgage), make unsecured loans, and also invest in traditional assets such as stocks and mutual funds. With real estate bought by a self-directed IRA, any income and capital gains grow tax-deferred in the case of traditional IRA or tax-free in the case of a Roth. Fees for a "self directed" IRA with a full-service custodian are higher than those charged by custodians offering only traditional securities. There are only 3 assets classes the IRS forbids you to hold within an IRA: Collectibles, Life Insurance, & S Corporations. As usual with the IRS, there are lots of little quirky rules that failure to follow could result in significant penalties so this type of IRA investing is not recommended for people skittish about actively participating in the decision making process. Anyway, you would not have to sell an office building or a herd of cattle just because you changed custodians. The "system" is geared towards funneling the "masses" into traditional securities. OTOH, that's the safest investment for the vast majority of people. /tricia

>>Aside: Inheritences are not taxable (depending on the state) to those who receive them. Since your dh's name is on those accounts and she doesn't have a will, it's not considered an inheritence.That is certainly not true in the state of CA. Anytime someone dies, their assets are part of an estate inherited by someone - whether the joint owner, or otherwise specified heirs. If there is no will or joint ownership, the "rule of inheritance", known as "per stirpes" (which differs by state, BTW), will be followed. And more states are instituting estate taxes, especially as RE and sales tax revenues fall. The true issue is the overall size of the estate and how the state of domicile treats community and joint property. The federal estate tax limits are $2M for 2007/8, $3.5M for 2009, and unlimited for 2010. In 2011 it goes back down to $600K UNLESS Congress does something - which they doubtless will, but there are no guarantees on exactly WHAT they will do. In light of the burgeoning deficits (where oh where did our little budget surplus go?) it is a safe assumption the estate tax will continue, but at a higher level than the old $600K limit. The estate is liable for the taxability of all gifts made on its behalf, prior to final disbursement. Once inherited, it becomes part of the heir's estate, counted in with the heir's personal assets. Whatever gifts the heir distributes, are his/her tax responsibility. Realistically, if the gifts are going to total LESS than the federal estate tax limit for whatever year the Estate Owner dies, there is no tax due on either donor or receiver end. For instance, my MIL's estate is less than $1M. She can give her son $200K, file a report on the gift with the IRS, and nobody will owe any tax even when she dies. Her estate falls under the federal estate tax limits unless Congress does nothing and the limits revert back to the old $600K limit in 2011 and beyond. So as you can see, much depends on WHEN the person owning the assets dies, thus adding to the uncertainty of planning for the future. If you have a very large estate, one way to disburse an inheritance is to use the gift tax laws, currently $12,000 per person. You can even top-load by giving up to five years' of exclusion amounts at one time. In this example, a fond grandparent would disburse $60K for each grandchild, perhaps by funding a 529 plan for each child. In this way, with five grandkids, $300K is removed from the estate for federal estate tax purposes (for the next five yrs; after that they can start gifting again), with no tax liability to anyone. If both grandparents are alive they could each give $12K x 5 and remove $600K from the taxable estate, no small sum. They would want to do this if their estate is large enough that it will trigger estate taxes no matter what Congress does - although if the federal estate tax is eliminated, that strategy becomes unnecessary and I would expect they would revisit the inheritance scenario at that time. As far as the IRA is concerned, she is taking her mandatory distributions, called RMD. Upon inheriting the IRA, your DH should NOT roll this money into his own IRA, but keep it separate. He is required to continue taking the RMDs based upon HIS life expectancy, and yes he will pay income taxes on this. He cannot avoid taxes by rolling it over to his children; the tax liability will only shift to them - but there may be other legal issues here, so he would definitely need to speak to a tax advisor about this. I don't know how one could disclaim an IRA to pass it on to other heirs, but your DH should specifically request the details on how to "stretch" an IRA (that's the technical term, if I recall correctly). Your DH should also remember that there are tax consequences to liquidating the taxable assets of anyone, including an estate. Any profits ARE taxable and no distributions to heirs should be made until the final tax return for the estate is done. In that manner the estate will pay the income tax, not the heir.

I had seen an article on this subject in the WSJ, so I needed to do a search to pull it up again. Here's the pros and cons: WSJournal Investing, November 2, 2008 IRAs May Be Ripe For Shift to Roth One of the simplest ways to take advantage of the continuing market turmoil: Convert your battered investments from a traditional individual retirement account to a Roth IRA. When you convert traditional IRA assets to a Roth, you have to pay the income taxes upfront on the account's value -- and in some cases, those values may be next to nothing at the moment. With a Roth IRA, there are generally no taxes on withdrawals or any future earnings, unlike with traditional IRAs. There's also no mandatory distribution schedule -- again in contrast with traditional IRAs, from which account holders must begin taking minimum distributions by April 1 of the year following the year they turn 70 years old. Plus, you can leave a Roth account intact for your heirs. (Heirs other than your spouse would have to take required withdrawals each year, but they generally wouldn't owe any tax on them.) To be eligible to convert traditional IRA assets to a Roth, your income must be $100,000 or less. So any hit that your paycheck has taken from the economic downturn might help you do a Roth conversion. (Starting in 2010, there is no longer an income limit for Roth conversions.) Neither a required IRA distribution nor the converted amount would count against the $100,000 income limit. If you are 70½ or older, you have to take this year's required distribution before converting any traditional IRA assets to a Roth. Withdrawal Rules Many IRA holders get tangled up in the "five-year" rule when they convert IRA assets to a Roth IRA: You have to hold those assets in a Roth for five years or until you turn 59½, whichever comes first, to make penalty-free withdrawals of converted amounts. Each conversion has its own five-year clock. But if you have already reached age 59½ and you convert traditional IRA assets to a Roth, you can withdraw the actual assets you convert at any time without worrying about a five-year deadline or penalties. It's a different story with any earnings on those assets: Again, you must have held a Roth account for five years to withdraw any earnings tax-free. But you don't need to worry about separating the converted funds from the earnings; that's because the withdrawal rules for Roth IRAs say that any distributions first come from contributions, then from conversions, and finally from earnings, says Ed Slott, an IRA consultant in Rockville Centre, N.Y. Chuck Bauer, a 62-year-old manager in Pittsburgh for Aker Solutions, an engineering and construction company, has a combination of market losses and lower-than-normal income this year. So he is taking the advice of a local financial planner, Bud Kahn, and converting his IRA to a Roth, he says. Mr. Bauer will have to pay about $29,000 in income tax on the conversion, but "we think the account has gone down about $32,000," says Mr. Kahn. "When the account recoups its losses, he will have made up the taxes that he paid. And then that recoupment is never going to be taxed again." Changing Your Mind What if you converted traditional IRA assets to a Roth earlier this year, and those assets have declined in value? In that case, you may want to "recharacterize" the Roth as a traditional IRA. It's a way, says Mr. Slott, to "erase the taxes" on value that has since disappeared. Frank Russo, a 66-year-old Verizon Communications retiree in Port Washington, N.Y., recharacterized IRA investments that he had converted to a Roth after watching their value fall at least 15%. "I don't have to pay tax on an amount that no longer exists," he says. To do a recharacterization,you have to use a "trustee-to-trustee" transfer, also called a direct rollover or direct transfer, to move the contribution from one IRA to another. Don't touch the money yourself, and make sure no checks get made out directly to you or deposited in your bank account. The assets are treated as if they never left the traditional IRA, Mr. Slott says. If you recharacterize your Roth as a traditional IRA by Nov. 30, you could then convert the lower-value assets to a Roth again as soon as Jan. 1, he adds. See IRS Publication 590, at www.irs.gov, for information about traditional and Roth IRAs.

As far as the IRA,s, she had these long before we were married so I dont think I can touch those. As far as the trust for the kids, I think it is a good idea but it does not help me raise these kids. I could really use this money. I feel like this is just so wrong of her. Its almost like she does not trust me or have any respect for me. I know originaly, when my wife first got this policy, She has providing financial support to her mother to help raise a relatives daughter. That was many years ago and I guess she still feels she should have the money. I got a feeling that this money will tear the family apart.