Originally Posted by kaneohe
MCF----I highly recommend you post your question on the irahelp.com forum.
As you have already noted this is a complex situation involving both estate tax
and stretch IRA/401K issues . Somehow I have gotten the idea that normally
individual beneficiaries are recommended for IRAs/401Ks. Purely from the stretch aspect then, why not have spouse as beneficiary of 401K and kids as contingent?
If spouse survived you, she could name kids as beneficiary of her IRA (from your
401K) and if she didn't survive you, kids could setup stretch IRAs from your 401K
with their longer life expectancies . Don't know estate tax consequences of doing this.
If trust is beneficiary of 401K, does that mean dw has access to funds and does that mean that RMDs are based on her shorter life expectancy? What happens after she
is gone.......are RMDs still based on her shorter life expectancy?
If dw does not have access to funds, what is advantage of trust over having kids
as beneficiaries? No answers, only questions ....which is why I recommend
irahelp.com . Good luck on the learning curve.
kaneohe, Good idea, I will do that.
I have found that precise wording (aka lawyer B.S. weasel words, my apologies to all the esquires out there) in explainations is critical.
In my case, we have two trusts set up. One for DW and one for me. We are co-owners of the trust for each one. So when I pass, she has total access to the contents of my trust. She is the primary beneficiary of my 401K with the trust being contingent (I think thats the term)... in any case, she can refuse it and then it goes into the trust. The reason for it going into the trust is purely estate planning (one part of us hopes that each trust is so big that we have to worry about estate taxes, ...etc., the other part hopes we spend it all, as our kids tell us to do). If she precedes me in death then I (previously to tomorrow) had to worry about 401K not being able to roll to kids without bad tax consequences (payment of taxes over a few years vs. the extended life of the kids). Hence my original posting, since I had heard that things were changing, but did not quite know how they were changing or when. It looks like congress has fixed that. When we both pass, the funds in both our trusts go into a separate trust for each of the kids. At that point, I believe I know longer care what happens to the money, although I have set it up so that it can grow for generations, if it lasts that long. Personally I hope my son and daughter buy nice big yachts and names them 'Daddy's Gift'
, or something like that (since my DW and I don't have the monetary temperment nor desire to do so). hmm I think I am kidding, but not quite sure.
So, I think I have the answer to the question I had posted, but as you point out, it does not hurt to get a verification of this.
I have found that we have many regulars on this board who have the knowledge and inclination to help and 'point' in these complex matter. Thanks to all and have a Happy New Year.