Trust as Primary Bene/QTIP Trust identifies spouse
Spouse died in 2005. The Trust was named Bene of Roth and regular IRA’s. Within trust Trust, a QTIP exists dividing estate further into Marital Trust for spouse and Family Trust for a child. Within QTIP, it identifies the IRA’s be utilized first to satisfy the spouses Pre-Nuptual agreement. Two years have passed, nothing has transpired in money exchange. There is diverse interpretation amongst Executor/Attorneys/and Financial Advisor.
1.Should the 706 Tax identify the IRA’s on Schedule M for Marital deduction?
2. Should the IRA’s be retitled to identfy ‘FBO of spouse’?
3.What type of distributions can be expect from the IRA’s? Am I understanding this correctly, that the spouse should be considered as the primary beneficiary?
Almost two years have passed and the Executor has not allocated any tangable money for spousal support. The original attorney was fired by the Executor, and original Financial Advisor does not seem most reliable. I have read multiple forums as well as your book ‘Parlay Your IRA…’ but can’t find the exact backing of documentation to help me. Thank you greatly in advance for any help you can direct my way.
Permalink Submitted by Al Fry on Mon, 2007-10-29 01:01
Do you hsappen to be located in NY, NJ or FL?
Permalink Submitted by greg van ort on Tue, 2007-10-30 03:45
[quote=”[email protected]“]Do you hsappen to be located in NY, NJ or FL?[/quote]
Permalink Submitted by Alan Spross on Tue, 2007-10-30 05:49
Probably because those are the states that Bruce Steiner is licensed to practice in. Bruce is an authority on trusts and retirement plans and posts to most of these issues. However, he can post to this regardless of which state you are in, so perhaps he will see this one.
Permalink Submitted by Bruce Steiner on Tue, 2007-10-30 22:50
Al and Alan: thanks for the kind words.
I saw this thread, but hesitated to jump in because I couldn’t be sure of all of the facts; and because, while a forum like this can be useful for general information, the original poster needs to consult with competent tax/estates counsel who can give her specific advice based upon the actual facts and her objectives.
Since the trust divides into a QTIP and a family trust, chances are it’s a revocable trust. I couldn’t be sure what the reference was to using the IRAs to satisfy [the obligations under] the pre-nuptial agreement. That raises the question as to whether there’s some way to get some or all of the IRAs to the spouse so she can do a rollover. See my article on that in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf
It would be helpful to know the specific terms of the QTIP and family trusts, the formula (pecuniary marital, pecuniary credit shelter, or fractional share) for dividing the trust between the QTIP and family trusts, and whether the IRA has to go to one or the other. It would also be helpful to see the pre-nuptial agreement.
The estate tax return is due 9 months after death. The due date can be extended for 6 months. If the IRA owner died in 2005, if the estate tax return has not been filed, it is late.
Where a QTIP trust is the beneficiary of an IRA, the IRS takes the position that both the QTIP trust and the IRA itself must qualify for QTIP. But it’s not clear that the QTIP trust is the beneficiary of the IRA here. In any event, the executor’s attorney is the one who should be preparing the estate tax return.
Without knowing more about the situation, there’s no way to tell if and how the IRAs should be assigned.
If the spouse is the oldest beneficiary of the trust, and if certain other requirements are met, even if she cannot do a rollover, it may be possible to stretch the distributions from the IRA out over the spouse’s life expectancy.