Private Wealth Management: The Complete Reference for the Personal Financial Planner, Ninth Edition by G. Victor Hallman Ph.D. J.D. & Jerry S. Rosenbloom Ph.D

Author:G. Victor Hallman, Ph.D., J.D. & Jerry S. Rosenbloom, Ph.D.
Language: eng
Format: epub
Publisher: McGraw-Hill Education LLC
Published: 2015-04-14T16:00:00+00:00

Federal Estate Taxation

The full value of any death benefits payable under a qualified retirement plan, TSA, traditional or Roth IRA, or similar plan are includible in the decedent’s gross estate for federal estate tax purposes. To the extent that such death benefits are payable to a decedent’s surviving spouse (either directly or through a qualifying trust), they will qualify for the marital deduction and be deductible from the gross estate in arriving at the taxable estate. (See Chapter 26.)

Married persons with estates large enough to need federal estate tax planning may want to have qualified plan and IRA death benefits qualify for the marital deduction. It can be argued that these often are good kinds of property interests to qualify because they generally are wasting assets. That is, they are burdened with an inherent income tax liability at the time of any distribution (except for Roth IRAs) to the surviving spouse, which will further reduce the surviving spouse’s own estate at his or her subsequent death. This planning idea really is true of any IRD item in the gross estate.

There are several ways these death benefits can be made to qualify for the marital deduction, including by being payable:

In a lump sum to the surviving spouse as beneficiary12

As a joint life and last survivor annuity for the participant and his or her spouse if no person other than the participant and his or her spouse can receive any payments prior to the death of the last spouse to die

To a trust that will qualify for the marital deduction

The planning issues involving these methods are discussed in the final section of this chapter and in Chapter 26.

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