Splitting IRAS evenly for each beneficiary (2 children) and splitting assets evenly among heirs
i have been reading Ed Slott’s book The New Retirement Savings Time Bomb, and what an eye opener.(haven’t finished reading yet) So, here is my scenario and question. I have two children married and living on their own, one is disabled, so I intend to split the retirement accounts one for each as discussed in the book with each one as a beneficiary. The trust, however, calls for all the assets to be split 50/50. But even though I split the retirement accounts 50/50, they are bound to grow at different rates. So lets say for arguments sake, there is a million dollars in the estate, 500,000 represents IRA amounts. I split the retirement accounts 250k each. so now we have 500 non-ira money 250 ira and 250 ira for each beneficiary. Lets say I die in ten years IRA one grows to 400K IRA 2 grows to 600K and the 500 non-ira money grows to 700K.
So you split 700K to 350/350 that means beneficiary 1 has 750 (350+400) and beneficiary 2 has 950 (350+600). The two are no longer 50/50 because the IRAs grew at different rates
How do you put in the trust that the assets are to be split equally when you have separate IRAS that grow at different rates, do you keep having to transfer money from one IRA to the other to make them equal. How is that done?
Permalink Submitted by Alan - IRA critic on Sat, 2021-09-11 02:39
Basically, if you maintain separate accounts for each beneficiary and you want them to have values very close to each other upon your death, you either have to invest them identically, or make transfers between the two if the value difference exceeds a threshold that you would determine. You should talk to an estate attorney who is well versed on the multi beneficiary trust provisions in the Secure Act, and also on supplemental needs trust (SNT) provisions in your state. It is highly likely that an SNT for the disabled beneficiary will be recommended, and if the trust is qualified for look through the RMDs paid to the SNT will be based on the life expectancy of the disabled beneficiary, while the non disabled beneficiary may inherit directly, but would be subject to the 10 year rule. Once all the Regs are written for the Secure Act, there may be a more preferable option, but I would not be stressed by somewhat small differences in the value of the inherited accounts upon your death as there are more important issues, particularly for the disabled beneficiary.