Probate & Trust Law Section Conference Manual ... - Minnesota CLE

v. Income tax. The QTIP distribution to S from retirement
account assets will constitute IRD and will be ordinary
income to S. IRC § 691.
c. Outright to Spouse And Spouse Rolls Over to “Charitable”
IRA.
i. S is beneficiary of the retirement account if S survives P,
and the charity is contingent beneficiary if S predeceases P.
ii.
iii.
iv.
If S survives P, at P’s death S rolls the account balance
over to S’s IRA. IRC § 408(d)(3)(A); Treas. Reg. § 1.408-
8, Q&A-5. If S predeceases P, the charity receives the
account.
S makes withdrawals from her IRA under the minimum
distribution rules.
S designates the charity as beneficiary of her IRA.
v. At S’s death the balance in the IRA is distributed to charity.
vi.
vii.
viii.
RMDs. Spouse takes over RMDs in her own name.
Estate Tax.If S survives P, the marital deduction applies at
P’s death, IRC § 2056,and the charitable deduction applies
at S’s death.IRC § 2055(a). If S predeceases P, the
charitable deduction applies at P’s death.
Income Tax. Amounts distributed to S from her IRA will
constitute IRD to S, taxable as ordinary income.
d. Split Account into Two IRAs
i. P divides his retirement account into two IRAs. Treas.
Reg. § 1.401(a)(9)-8, Q&A-2. He names S as beneficiary
of one and the charity as beneficiary of the other.
ii.
iii.
iv.
If S survives P, at P’s death S rolls her account over to her
own IRA, and the charity receives its IRA.
RMDs. S’s share can be rolled over by her and use her
RMDs. Charity share pays out immediately.
Estate Tax. There is no estate tax at P’s death because of
the marital and charitable deductions. Estate tax
consequences at S’s death depend on who she names as
beneficiary of her IRA.
14