Trust is a beneficiary of IRA instead of spouse
One of my clients passed away and we just discovered that her trust is the beneficiary of the IRA. It is an IRA annuity with Prudential and they said that they will send a check to the trust. They will not recognize the look through provision the trust provides. If the spouse receives the check can he go ahead and put that money into a spousal IRA in his name?
Permalink Submitted by Alan Spross on Wed, 2010-04-21 21:26
He could if he is the sole beneficiary of the trust and the trust does not contain any provisions to the contrary.
Permalink Submitted by Bruce Steiner on Wed, 2010-04-21 23:25
It’s often possible to get the IRA to the spouse so that the spouse can roll it over. See my article on this in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf. He may want to look into this before doing anything.
Permalink Submitted by [email protected] on Tue, 2010-05-04 20:02
Bruce,
Thank you for your information referencing your article written in 1997. This 7 page article was wonderful, covered a lot of territory, disseminated a lot of information and even referenced the notion of disclaiming. However, I’m concerned that the 13-year-old treatise on this topic might be a little dated. I’m not an attorney but I have read many legal articles over my 40 years in practice as a financial advisor and I understand the legalese discussed.
What I’m looking for is a solution i.e. disclaimer wording that would prevent the insurance company from cutting a check to the trust. After speaking with the claims department at Prudential they indicated that if we were to use a disclaimer they would then issue the check to the estate. So, I’m not sure that would fix anything.
Conrad Roskelley, CFP
Chandler Arizona
Permalink Submitted by Bruce Steiner on Tue, 2010-05-04 20:18
The article is still current. If anything, the IRS is more liberal today on this issue than they were in 1997.
I would have to look at the trust (and possibly also the Will) to determine whether it’s possible to get the IRA to the spouse, and if so, to prepare the appropriate disclaimer(s).
If, as a result of the disclaimer(s), the IRA goes to the spouse via the estate, the spouse may still be able to do a rollover, even though the financial institution would be making the distribution to the estate.
Depending on the facts, and the amount involved, it may make sense to obtain a private letter ruling.
Permalink Submitted by [email protected] on Tue, 2010-05-04 20:38
Thank you,
This is very encouraging. We are talking about a $64,000 stepped up death benefit with the current account value at $56,000. I can see that I’m going to need some expert help on this in order to analyze the trust and will plus write the appropriate disclaimer or disclaimers. I’ve tried to work with a local Ed Slot Master Elite IRA specialist but she is seemingly to preoccupied to return my calls of late.
Permalink Submitted by Bruce Steiner on Wed, 2010-05-05 04:04
Only a lawyer can analyze legal documents or prepare disclaimers or other legal documents for others.
Permalink Submitted by Alan Spross on Thu, 2010-05-06 03:19
Bruce,
Did you happen to see the article “Leaving your Roth IRA to the Kiddies” in the May 1-2 WSJ? The article appears to quote Seymour Goldberg as saying that a Roth IRA left to a trust is NOT protected in BK in NY or FL? I thought that you have been indicating that the IRA would be protected.
Permalink Submitted by Bruce Steiner on Thu, 2010-05-06 03:25
Yes, I saw the article. I often disagree with both the author and her source.