Second Spouse/Use of IRA during Surviving Spouse’s Lifetime and then to Deceased IRA Owner’s Daughters (not of marriage)
I am handling an estate planning matter where the couple’s marriage is a second marriage. They both have children from a previous marriage but no children together. Wife has an IRA that she would like Husband to use upon her death throughout his lifetime with remainder to go to her adult daughters (no disabilities etc.). I looked through the materials from the July seminar I attended and couldn’t find what I needed (which probably has more to do with my abilities than anything else!). My thought was that I would do a QTIP type arrangement with conduit? Any ideas about this? I’ve not done anything like this before and would need help with forms etc. to get there.
Permalink Submitted by Alan - IRA critic on Wed, 2021-11-10 19:52
You are referring to a “QTIP” trust since a QDRO is used to split qualified plans in a divorce. An estate and trusts attorney is needed to properly draft a QTIP trust, which provides lifetime income to the spouse, but very limited access to the IRA principal. This insures that her children will receive the remaining balance of the IRA upon husband’s death and he cannot change that.
Permalink Submitted by Julie Rivers on Wed, 2021-11-10 23:26
Well, I feel stupid… I meant QTIP. That’s what happens when you do two things at once. I AM an estate and trust lawyer. Duh. I need guidance on how to use a QTIP trust when it’s an IRA that’s getting QTIPed.
Permalink Submitted by Bruce Steiner on Thu, 2021-11-25 01:50
Given the current level of the estate tax exclusion amount, you may not need the marital deduction. But if you want the marital deduction, the spouse must be entitled to all the income from both the trust and the IRA. See Revenue Ruling 2000-2.
If you don’t need or want the marital deduction, you won’t need that.
While conduit trusts don’t often make sense, in the case of a spouse, if it’s a conduit trust, you get to recalculate the spouse’s life expectancy each year. That slows down the required distributions. However, if the spouse lives a long time, the spouse will have received most of the value.
Bruce Steiner