Estate planning and using the correct trust for childern with big age gap
I am in the process of working with an attorney to set up estate planning and trust for both my self and my wife. We have multiple IRA’s for both of us and two children we want to leave these to so that they gain the stretch benefits. We want to make sure these go to an inherited IRA and will be using a trust for this. My question is in a family trust it will factor RMD based on the oldest child in trust. There is a 7 year gap between them. Should we use a different trust structure so the youngest is not handicapped by the others age?
Permalink Submitted by Bruce Steiner on Fri, 2014-02-28 04:29
Even if you provide separate trusts for each child, as most people do, the older child will probably be a contingent beneficiary of the younger child’s trust (if the younger child dies without leaving any issue and without exercising his/her power of appointment). You can avoid this result by excluding the older child as a contingent beneficiary of the younger child’s trust, but in most cases you would want to keep the older child as a contingent beneficiary of the younger child’s trust. Possible exceptions are (i) where there is a large age difference, and (ii) where the younger child already has several children of his/her own so that the likelihood that neither the younger child nor any of his/her issue will be living at a time when the older child is still living is remote. For more on trusts as beneficiaries of retirement benefits, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf .