IRA distribution to not responsible children.
My daughters will not wisely spend their $400,000 share of my IRA. I understand that they can convert it to a new IRA and get the monies over their life time based on their age etc. I don’t know if they will do that, vs getting the chuck and paying full tax on it. Both need retirement money to survive as they get into their 70’s etc.
So, is there any vehicle out there that will wind up them doing that? Go to a trust or something initially, and that trust do the life payout scheme?
There has to be answer out there. Any guys out there with the same (take care of irresponsible kids) problems? Thank you
Permalink Submitted by Alan - IRA critic on Wed, 2013-08-14 23:02
You could name a qualified trust as your IRA beneficiary, and have the trust drafted to include discretion on the part of the trustee and wording that limits distributions to RMDs only unless certain specified conditions arise. If the trust is qualified for look through treatment, RMDs can be based on the oldest beneficiary of the trust. You might want to have separate trusts for each daughter and could vary the conditions and this would also allow the youngest to use her own life expectancy rather than that of the oldest daughter. You definitely need to identify a trustee who can handle the job and follow your provisions to the letter. The trustee must realize that the IRA cannot be rolled over and can only be moved to a different custodian by direct custodian transfer.
Permalink Submitted by Bruce Steiner on Thu, 2013-08-15 02:02
You could leave each daughter’s share in trust rather than outright. Since there’s no way to know what the future will bring, our clients almost always give the trustee complete discretion to decide how much, if anything, to distribute. In most cases, each daughter’s trust will have to take distributions over the oldest child’s life expectancy, since each daughter would be a contingent beneficiary of the other daughter’s trust (if the other daughter died without leaving any issue).For more on trusts as beneficiaries, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.
Permalink Submitted by Warren Kuetemeyer on Fri, 2013-08-16 22:29
I can’t seem to find the section regard your comments in the journal of March 2004. Can you narrow that down for me. thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2013-08-16 23:10
It’s the article that starts on p 108 in the referenced link.