The IRA Beneficiary Quandary

Shanney-Saborsky, Regina
August 1996
Journal of Financial Planning;Aug1996, Vol. 9 Issue 4, p16
Academic Journal
The article analyzes the individual retirement accounts (IRA) applicable in the U.S. For maximum benefits the financial planner must focus on a coordinated tax planning blueprint that includes the eventual disposition of the estate to the beneficiaries. The planner can utilize the available unified credit and unlimited marital deduction to greatly reduce tax liability in estates up to $1.2 million. If a significant asset of the estate is, however, an IRA, the benefits associated with use of a trust beneficiary must he weighed against the potential loss of planning opportunities available to the spouse. Assets in art IRA have significant estate, income and even excise tax implications. Similarly, the IRA is subject to a 15 percent excess accumulation excise tax. This tax is applicable to lifetime distributions in excess of $155,000 annually. Finally, an IRA is required to comply with the minimum distribution rules. Subject to careful planning, a trust, including a QTIP, may be considered as the beneficiary of the IRA. More recent private Letter rulings (9611057, 9615043) provide further guidance in the coordination of the trust as an IRA beneficiary.


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