In establishing an A-B Trust, we want our spouse to receive the other spouse IRA on death of first spouse's death and our children as beneficiaries at time of both of our deaths. What is proper way to designate our beneficiaries? Thank you.

It sounds as though you should each designate your spouse as PRIMARY beneficiary of your IRA, and the children as CONTINGENT beneficiaries. Alas, if you use something is common and simple, for that designation, as "my wife, Carol, if living; otherwise, my children, equally, per stirpes", you could be out of luck, because MANY IRA CUSTODIANS WILL NOT ACCOMODATE A "PER STIRPES" DESIGNATION.

Of course, you might want to name the Credit Shelter ("B") Trust as contingent, but you'll want to make sure, if so, that the Trust will qualify as a "designated beneficiary trust". That is a LOT trickier than it might seem. For example, if the Trust doesn't include language which FORBIDS the Trustee from paying any estate tax or debts of the estate from IRA proceeds, that Trust could fail to qualify. If that trust is funded by a "pecuniary formula", it could fail to qualify.

Bottom line: Have this issue examined by somebody who REALLY UNDERSTANDS how all these rules work and interact.




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John L. Olsen, CLU, ChFC
Olsen Financial Group
St. Louis, MO
314-909-8818