QTIP as IRA beneficiary

[Guest PBrinckerhoff]

I am confused as to how a QTIP works. I have a married client-both she and her husbnd have children from a former marriage and no children of their own-who is the participating spouse of an IRA. We are in CA, so the husband has a community property interest in the IRA. They would like the IRA to ultimately be distributed 1/3 to his kids and 2/3 to her kids. I understand that the only way to do this is through a QTIP trust, because otherwise the surviving beneficiary is free to change the beneficiary desination after the death of the first spouse.

If I make the QTIP trust the beneiciary of the iRA, then if the wife dies first, the IRA goes into the trust, pays out all income to the husband for his life, and then goes to the children as agreed.

Question 1: At the wife's death, does all of the IRA go into the QTIP, or just her interest?

Question 2: What happens if the husband predeceases the wife? She is still the record owner of the account. Does any interest pass into trust, or does she keep the account in her name? If so, couldn't she still change the beneficiary designation after his death (providing he died before the RBD)?

[Mary Kay Foss]

QTIP Trusts and IRAs are very complicated. I'm responding to your second question. Many estate planning attorneys in Northern California are suggesting that spouses enter into an agreement so that the IRA is always allocated to the second-to-die. Such a provision takes away the potential problem you've described in your second question.

The changes to the proposed regulations say that a Trust named as a beneficiary must be irrevocable at the Grantor's death. If an executor must make a QTIP Election is the trust irrevocable? I'm only a CPA not an attorney but I think it may not be.

Good luck in finding a definite answer.

[Guest P A Weick]

The QTIP election has nothing to do with whether the trust is irrevocable at death. The trust document would tell you that.

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