Fill Your Tax Brackets, Protect Your Assets, and Sleep Better:
Why Roth Conversion Math Applies to Living Trust Plus® Funding
For nearly a decade, ever since the Tax Cuts and Jobs Act (TCJA) took effect in 2016, I and most experienced financial advisors have encouraged clients to consider strategic tax bracket management each year, which means taking larger than required distributions from your IRAs and qualified retirement plans to intentionally fill up the tax bracket you're already in, and often the next higher tax bracket, especially if your income already lands you in the 22% federal tax bracket, given that the next bracket is only 24%.
The logic is
straightforward: all funds in your IRAs and qualified retirement plans (such as 401(k)s and Thrift Savings Plans) are taxable funds, meaning that you, or your beneficiaries after your death, are going to pay taxes on all distributions. Remember that these funds have not been growing tax-free; they've been growing tax-deferred. So, when the federal income tax rates are historically low, the goal is to take advantage of them. And they are still historically
low.
Whether you fill those brackets and then put the after-tax money into a Roth IRA via a Roth conversion or by withdrawing retirement funds to place after-tax money into a Living Trust Plus®, the core strategic question is the same:
How much additional income can you recognize this year without spilling into the next bracket, losing deductions, or triggering penalties?
For almost ten
years, this advice sat against the backdrop of what was thought to be a hard deadline — the scheduled 2025 sunset of the TCJA bracket structure. Clients knew they had limited time to execute long-term tax and asset-protection planning before the tax brackets expanded and rates rose.
The One Big Bill (OBBBA) changed the landscape by making these historically low tax brackets ongoing, with no sunset in sight. This new stability opens the door for long-term
planning at stable, predictable tax rates.
The continuation of the TCJA brackets is not a new tax benefit, but it preserves an extremely helpful planning window that was previously closing.
Below is a deeper look at how this impacts your planning — and how Roth conversion math is equally important when deciding whether and when to fund your Living Trust Plus®.
OBBBA Keeps the TCJA Brackets in Place — Indefinitely
OBBBA is a
major federal tax bill that prevents the TCJA tax brackets from expiring.
The bill preserves:
• The 22% and 24% tax brackets
• The TCJA-era bracket widths
• The higher standard deduction
• The improved bracket thresholds that reduce bracket creep
In practical terms, this means:
• The tax-efficient planning techniques you have relied on for the past decade continue without interruption.
• There is no 2025 “cliff.”
• You have ongoing
predictability in determining how much income to recognize each year.
For a clear listing of the current bracket structure, see our reference chart here:
IRS Tax Brackets
Why Filling the 22% and 24% Brackets Has Always Been Smart Planning
The logic behind filling these brackets is compelling. The 22% and 24%
brackets have been historically favorable compared to prior decades, when the equivalent rates were 25% and 28%, and clients have used this window to:
• Convert portions of their traditional IRAs to Roth IRAs
• Withdraw funds for asset-protection planning
• Reduce future Required Minimum Distributions
• Spread out taxable income intentionally
• Reduce future exposure to IRMAA surcharges
• Reduce the risk of being pushed into higher brackets later in
life
That same logic applies today — but without the former sunset pressure.
This opens up new opportunities for intentional, multi-year planning.
Why Roth Conversion Math Applies Directly to Living Trust Plus® Funding
The IRS prohibits any trust — including a Living Trust Plus® — from owning qualified retirement accounts. IRAs, Roth IRAs, 401(k)s, and other qualified plans must remain in your individual name.
However, once you
withdraw funds from your IRA and pay the resulting income taxes, those after-tax dollars can be placed into a Living Trust Plus® and fully protected under the trust’s terms.
This is where the Roth analysis overlaps with the Living Trust Plus funding question.
The first half of Roth conversion math is identical to the first half of IRA-withdrawal-to-trust math:
• How much room remains in
your current tax bracket?
• What is the next higher tax bracket and how much room remains in that tax bracket?
• How much additional income from your IRAs and qualified retirement accounts can you recognize this year without pushing into an undesirable tax bracket?
• How will the extra withdrawal affect your standard deduction, credits, and phaseouts?
• Will extra withdrawal trigger IRMAA two years later? If so, how much, and is it really a significant
factor?
Before deciding whether a Roth conversion makes sense, you need to evaluate these questions. The same evaluation applies before deciding whether to withdraw IRA funds to fund a Living Trust Plus®.
The second half of the analysis diverges: Roth conversions focus on long-term tax-free growth, while Living Trust Plus funding focuses on asset protection, Medicaid eligibility planning, and long-term care risk mitigation.
But the
bracket-filling step is the same.
For clients who want deeper guidance on Roth conversions specifically, this article is available:
Should You Convert Your Traditional IRA Into a Roth IRA?
What Exactly Is the Living Trust Plus®?
Many clients fund the Living
Trust Plus after they understand its core purpose. Here is a detailed but clear explanation:
The Living Trust Plus is an irrevocable asset protection trust that allows you to:
• Protect your home
• Protect your savings
• Protect your investments
• Protect your non-IRA funds and non-qualified financial accounts
• Keep full investment and distribution control over your day-to-day finances
• Qualify for long-term care Medicaid
after the five-year lookback
• Qualify for the Veterans Aid and Attendance benefit after the three-year lookback
• Avoid probate and retain a clean, seamless estate plan
• Prevent your assets from being lost to the cost of nursing home care
Unlike a standard revocable living trust, which offers zero
asset protection, the Living Trust Plus provides true legal protection while preserving flexibility.
More details about the Living Trust Plus are available here.
Clients with large IRAs and qualified plans often pair the Living Trust Plus the with a structured bracket-filling strategy
where they withdraw manageable amounts from their IRAs each year, staying within their target bracket, and then deposit those after-tax dollars into the trust.
There is no Roth conversion involved — but the tax-planning framework is identical on the front end.
Peace of Mind: The Most Undervalued Benefit in Financial and Estate Planning
Financial planning is not only about math. It is also about psychology, stress management, and long-term
security.
Many clients underestimate the emotional benefits of taking control of their tax exposure and asset protection. This is why we created our Asset Protection Peace of Mind Assessment, which helps quantify a client’s comfort level with:
• Taking tax control now versus hoping future tax rates stay low and hoping you don't need nursing home level care
• Eliminating the fear of going broke after entering a nursing home
because of the catastrophic expenses of long-term care
• Mitigating the risk of catastrophic long-term care costs
• Protecting assets sooner rather than later
• Reducing uncertainty
• Structuring their estate so that children or other beneficiaries are protected
You can access our new Asset Protection Peace of Mind assessment here: Asset Protection Peace of Mind Assessment
Clients with higher “peace of mind scores” often decide:
• To withdraw IRA funds using a controlled, bracket-filling strategy
• To protect assets through the Living Trust Plus® sooner
• To avoid leaving large pre-tax accounts exposed to unpredictable tax and long-term care risks
• To reduce the
burden on their children
Peace of mind is no longer a vague idea — with our new assessment tool, it's a measurable planning factor.
Bottom Line
OBBBA keeps the TCJA bracket structure in place indefinitely. That means:
• The tax-efficient Roth conversion strategies you have used for a decade still work.
• The bracket-filling strategy for funding a Living Trust Plus® still works.
• You can plan long-term without fear of a 2025 tax-rate
shock.
• You can execute either strategy — or both — on a predictable timeline.
The key question is no longer “Do I need to act before 2025?”
The question is:
How can I optimize bracket-filling now, next year, and over the rest of my retirement?
If you want to explore a personalized analysis of Roth conversions versus Living Trust Plus® funding using tax bracket strategic management, income patterns, long-term
care risk, and your Peace of Mind profile, contact our office and we will run the numbers.
Additional Resources:
• Avoiding the Most Common Retirement Mistakes
• What Are the Rules for Taking Money Out of Tax-Deferred Retirement Accounts?
• Avoid Disaster — Update Your Estate Planning Documents in Light of New SECURE Act Provision
• Understanding the Changing RMD Landscape
