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Typical A B trust with most of the Assets in... Expand / Collapse
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Anonymous
Posted 7/19/2007 8:26:32 AM




Hi,

Can someone point me to a good article on estate planning when the primary asset is a IRA. The problem is that the estate exceeds the exemption amount, but not the Husband and Wife's combined exemption amount, but the main asset is an IRA. The problem is that part of the Bypass trust may have to be funded with the IRA. This is in California so it is community property. An attorney has suggested using a disclaimer type of trust in this situation.

Thanks in advance for any information.
Post #434
Posted 7/19/2007 3:35:36 PM
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I don't know of any article that will provide you with what you need off hand. I face this problem often because in my area a typical retiree has an expensive house and a large rollover IRA. In order to use the IRA in funding the B Trust, the trust must be a beneficiary of the IRA. If the spouse is the primary bene and the trust is contingent, then the spouse can do a fractional disclaimer to help fund the trust.

The other common problem is that the trust agreement doesn't cover the IRA. Your clients need an aggregate community property agreement that allows ALL community property to be considered when funding.

There are lots of income taxes to pay when the B trust is funded with retirement benefits. The RMDs are taxable income but not 100% trust accounting income - the B trust could be paying taxes at 35% on most of the RMDs.

I wrote an article for CalCPA magazine (or it's predecessor) a number of years ago but I don't think it's still available in cyperspace.

Mary Kay Foss

Post #435
Posted 7/19/2007 3:39:49 PM
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Look at PLR 1999-25033 for one possible way to plan.  I'm not aware of a recent article either.

John Jacobson
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