Legal Question in Wills and Trusts in Ohio

Managing spousal IRA's in a family living trust

My wife and I have a living trust and have assigned ownership of all of our assets to the living trust except for our IRA's. The IRA's represent a substantial part of our combined estates. Each of us have named the other as prime beneficiary under our respective IRA's and each of us have named the Living Trust as a contingent beneficiary. We have provided for AB trusts in order to separate property ownership to minimize Federal and state estate and inheritance tax. We have three adult children, two married and two grandchildren.

We want to be certain that none of our assets will be probated. How should we manage our IRA's? For example,

assuming I die first, what should my wife do with the IRA she receives from me? Can she disclaim ownership of the IRA

and place it in the B Trust created upon my death in order to keep it out of her estate for estate tax planning purposes. At the same time, how does she satisfy the Federal income tax rules requiring her to take annual IRA distributions from her deceased husband's IRA? I would want her to use the funds for herself upon her discretion but at the same time to leave as much in my B Trust in order to minimize estate taxes.

Thank you

Asked on 4/22/02, 12:29 pm

1 Answer from Attorneys


Re: Managing spousal IRA's in a family living trust

To answer your question completely you would have to give more facts such as the value and makeup of your combined estates. Generally, the IRA does not have to be in the trust as it is a contract outside any will and therefore not subject to probate provided you have named beneficiaries other than your estate. On the husbands death there is no tax incidence as the wife is entitled to a rollover and at her death it passes through her estate. It does get taxed at that time for estate tax purposes as does everything else except the credit shelter trust set up at the first decedents death and the exemption amount in the second death. As long as there are enough assets to fully fund the credit shelter trust without the IRA assets then putting the IRA into trust isn't not necessary. If there isn't that's when some creative planning has to be done. I have an Columbus Ohio office and can give you a referral if you are in that area.

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Answered on 4/22/02, 12:45 pm

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