In a current estate planning engagement, the married couple has decided to make the grandchildren the residuary beneficiaries of their estate (trust) as opposed to their kids as the kids are either very wealthy or very irresponsible. No GST issues for 2011.

So this is what I am recommending for the IRA beneficiary designation form:

PRIMARY: Spouse
CONTINGENT: Family Trust

I understand the “designated beneficiary” requirements when you make a trust the IRA beneficiary (valid trust, trust becomes irrevocable, beneficiaries identified, documentation provided) so I want to avoid a discussion about that if possible, but here are my …

…QUESTIONS:

1) Except for using the oldest grandchild age when calculating the RMD’s after the death of the second spouse, do you see any other disadvantages?

2) The trust does not currently say it must distribute all income to the beneficiaries so if it is not changed, the RMD could be taxed at the trust rates unless distributions are made.

3) If there are four beneficiaries, I take it only one tax return would be prepared as the separate share rule does not apply.

Besides commenting on these questions, any other observations / comments would be appreciated.

Thanks,

Glenn, CPA