Underfunded Trust
My wife and I have similar Revocable Trusts. We have been living off of her taxable account since my retirement, and her Trust is now woefully underfunded. The vast majority of my assets are in IRAs. Short of taking taxable excess distributions, is there any way to transfer a portion of my IRA assets to her Trust in order to fully fund it?
Permalink Submitted by Alan Spross on Fri, 2007-10-26 20:12
You cannot fund a trust with an IRA while the owner is still living, although a trust can be made the primary or contingent beneficiary of an IRA. There are a variety of trust types that can be applied in an estate strategy depending on what you are trying to accomplish. Unless there is a particular reason, your spouse or other family member may be better off inheriting the IRA directly. A trust IRA beneficiary can have decided benefits such as reduction of estate taxes, control of distributions to beneficiaries, creditor protection for beneficiaries, protection for children of prior marriages, preservation of Medicaid benefits for special needs beneficiaries etc.
Permalink Submitted by Al Fry on Fri, 2007-10-26 20:39
Perhaps your wife might suggest to start living off of your assets, and let hers recover somewhat. IRA stretch-outs are great for heirs, but sometimes there are other assets that are better held until death.
Permalink Submitted by Gerald Rubin on Fri, 2007-10-26 21:52
The reason I’m asking this, is in the event my wife dies first, haven’t we’ve lost the ability to shelter approximately 1.0MM from estate taxes, per current law. Is this not true?
Permalink Submitted by Al Fry on Sat, 2007-10-27 16:16
True, acrually $2 million this year and next. That is why it might be good to start balancing.