IRA and 2 million dollar exemption
My wife and I have an estate value of 3.4 million. We have utilized a trust to help protect our assets and our assets are divided just about equal within our trusts. I want to make sure I utilize the estate tax exemption, minimize taxes and enable the maximum stretch for our children. I have an IRA valued at about 1.6 million. The question I would like an answer for is can I split my current IRA for each one of my beneficiaries and still utilize my estate tax exemption?
Permalink Submitted by Alan Spross on Sat, 2008-05-03 01:25
You can partition the IRA into separate accounts for each non spouse beneficiary OR leave it as one account with multiple beneficiaries. The portion that passes directly to a non spouse (eg child) will utilize your own unified credit and be kept out of your spouse’s estate.
Note that in 2009, in just 8 months, the unified credit increases to 3.5 mm and there is slated to be no estate tax in 2010, with the credit returning to 1mm in 2011. There is no way Congress is going to leave this schedule as is. 2009 will probably stand as scheduled, but one common sense solution is to maintain that credit for a couple more years or possibly increase it to 5mm. I see no chance that it will actually return to 1mm or that the states will ever pick up a share like they used to.
Therefore, unless your gross estate grows considerably, your surviving spouse is not likely to have a federal estate tax problem, although you also need to consider what provision your state as adopted. Several have introduced comparatively low thresholds to recover what they used to get from the pick up share of the federal estate tax.
Note: If you are in a community property state and leave over half to other than the surviving spouse, there could be complications, since each spouse has a 50% interest in the other spouse’s owned retirement accounts.