Stretch options lost for children?

Submitted by Erwin Buck on Mon, 2019-01-28 17:10

When we changed BDs in 2010 we sent a $1m client new acct forms showing his wife as benef. of his IRA. He crossed her out and in his own hand wrote in an old AB trust from 1998. I called him at that time and strongly recommended a change back to his spouse. He refused. I wrote him a letter, again advising to name wife.

Now the client has died and the daughter is up in arms. Wife is Trustee and benef of the trust but I have to jump through hoops to see if a move to an Inherited IRA in Trust name and then a rollover to wife’s IRA impacts the stretch options. Fidelity of course won’t offer any tax advice. (I know, we can’t either.)



Submitted by Bruce Steiner on Mon, 2019-01-28 18:49

  • What’s an “AB trust?”  A is an archaic term for a marital trust, and B is an archaic term for a credit shelter trust.
  • He may not have wanted his wife to control any assets outright.  Or he may have wanted to make sure the credit shelter trust was fully funded (the estate tax exclusion amount was scheduled to revert to $1 million in 2011).
  • It shouldn’t be hard to set up an inherited IRA for whatever trust receives the IRA.
  • A spousal rollover may be more difficult.  See my articles on this subject in the October 1987 issue of Estate Planning, https://www.kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf , and the June 2015 issue of Trusts & Estates, https://www.kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf .
  • Fidelity should be able to implement anything that’s permissible.
  • They should be consulting with competent counsel.
  • Bruce Steiner

Add new comment

Log in or register to post comments