estate as benmeficiary of IRA

Submitted by Howard Hook on Fri, 2009-02-06 11:55

Dad dies in sept 2008 at age 77 leaving $1Million IRA. Beneficiary Form that is on file lists the words ” my estate”.

Will splits estate into two pieces 50% into trust for wife and 50% down to his two children.

Since estate is the bene, according to what I read, then there is no DB and as such RMD follows single life expectancy at age when deceased died which is12.1 years.

Question – Does the IRA get retitled as a inherited IRA with the estate as the owner ?

Question – How does the fact that 50% is supposed to go into trust for the wife play into the above.?

I presume that the IRA can be split into two inherited IRA’s (for ease of bookkeeping) and then the executor of the estate would be required at a minimum each year to withdraw the RMD from each share of the IRA and pay it to the trust with one share and pay it the other share to the children? Understanding that they could take more if need be. It seems to me that this would satisfy the IRS requirements as well as the terms of the will.

Thanks as always

Howard



Submitted by Bruce Steiner on Fri, 2009-02-06 14:28

It may be possible to get the IRA to wife so she can roll it over into her own IRA. See my article on this subject in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf

Submitted by Howard Hook on Fri, 2009-02-06 15:25

Bruce,

Thanks will take a look.

Problem i think here is that wife is not the mother of the children mentioned as the other bene. Trust that was setup in his will I believe was a QTIP trust (which i believe creates other problems here as well relating to defining income – will tackle that issue after resolving first issue).

Therefore using above new information are my original questions and proposed answers seem correct?

Thanks
Howard

Submitted by mk foss on Sat, 2009-02-07 01:56

The executor, in order to be discharged, may want to have the IRA split into one for the trust, and one for each child. This of course does not increase the payout period, it would still be based upon the decedent’s age.

I presume that the trust for the spouse passes to the children from a prior marriage at her death. That being the case you need to see how trust income is defined in the trust agreement. If everything in the trust’s share of the IRA is paid to the surviving spouse within 12 years, Bruce’s suggestion about attempting a rollover may not be inappropriate. However, if the RMDs to the trust are treated as part income, part principal, attempting a rollover would not be fair to the children.

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