Hello,

I have a client in Illinois. Husband has $10 million in an IRA. His wife owns the house (paid off, worth $500k) in her revocable Trust.

They are withdrawing $400k a year from IRA. He is 70, she is 66.

They have no other assets. Illinois has $4 million estate tax exemption, but it’s not portable between spouses. Assets must be moved to Bypass Trust at death of first spouse to preserve their exemption upon death of second spouse.

Do folks have suggestions as to how to achieve $4 million to the bypass trust if husband dies first? What if wife dies first?

My thoughts:

1. For wife to have $4 million: Accelerate distributions from husband’s IRA to fund wife’s Revocable Trust.
2. For husband to have $4 million to bypass trust. Name spouse as primary beneficiary, name his Revocable Trust (which funds Bypass Trust) as contingent beneficiary. When he dies, she disclaims $4 million of his IRA to flow to the Bypass Trust.

Open to advice and would love your suggestions please. Moving to Florida is not an option.

Thanks,

Peter