Slott Report Article – Widows Can Now Take Control of RMDs

Submitted by Mhotchkiss on Wed, 2016-09-21 13:56

Saw this article and because of the special name they gave this tool, “Retained Income Spigot Trust” it sounded interesting. Unfortunately, it appears to just be a CRUT under IRC Section 664. Granted, if they do away with the “stretch IRA” for beneficiaries, this sounds like it could be a possible solution to stretching payments, the article never mentions that it requires the corpus to go to charity at the end. How is this appropriate and not misleading? Can’t “Widows take control of RMDs” now? – m



Submitted by Andrew Glassberg on Wed, 2016-09-21 16:02

I can’t see how this article could be correct.  The Code section refrenced is for Charitable Remainder Trusts, but the article indicates that assets could pass to heirs after the death of the trust benficiary.  How would this be possible with a CRT?

Submitted by David Mertz on Wed, 2016-09-21 16:36

  • I had similar thoughts.  The article goes to great lengths to avoid the use of the word “charity” by not referring to it as a CRUT, seemingly intentional obfuscation.
  • Regarding the widow’s heirs, this may be referring to what those heirs would have received as heirs of the widow had the widow been the beneficiary of the retirement plan, but under the CRUT could be beneficiaries of the CRUT.  I imagine that the widow could make a trust (perhaps a CRUT) for the benefit of the spendthrift be the beneficiary of her own IRA or an inherited IRA of which she is the beneficiary, so a CRUT as the beneficiary of original owner’s retirrment account would not be necessary to accomplish this.

Submitted by Bruce Steiner on Thu, 2016-09-22 13:44

  • If the stretch is eiliminated, the surviving spouse might name a charitable remainder trust for the benefit of the children and then charity as the beneficiary of his/her retirement benefits, to get a result similar to that of the stretch.
  • The tradeoffs of this are that charitable remainder trusts are inflexible, and the payments have to go to the noncharitable beneficiaries outright rather than in trust.
  • The remainder going to charity is a minor cost.  The actuarial value of the charity’s interest has to be at least 10% of the initial value of the assets passing to the trust
  • We used to do this before the proposed regulations were overhauled in 2001 if someone didn’t have a spouse beneficiary and had elected recalculation.
  • There will be more discussion of this if the stretch is eliminated.  I think we should wait to see if that happens.

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