Shortcut Navigation:

Question for the Money Doctors

Question submitted on Dec 29, 2012.

Question

Who receives the RMD under a QTIP trust to provide income for life for beneficiary?

Answer

Generally speaking, the Qualified Terminable Interest Property (QTIP) trust itself would receive the RMD from the deceased individual''s IRA. Then the QTIP trust would distribute income to the beneficiary, who typically is a surviving spouse. If the beneficiary chooses to do so, the trustee must withdraw the greater of income earned or the Required Minimum Distribution (RMD). If the RMD for the year is greater than the annual income, the difference is added to the Trust’s principal.

QTIP trusts can be excellent planning vehicles when used in the proper situation. They can provide benefits such as:

1) Estate tax deferral until both spouses are deceased

2) Utilization of the unlimited marital deduction

3) Protecting and preserving an inheritance for other designated beneficiaries of the original IRA owner in addition to the surviving spouse

4) Limited income tax deferral utilizing the arrangement between the QTIP trust and the IRA

5) Control of the funds to ensure both the surviving spouse and other designated beneficiaries are able to benefit.

Consider a CPA/PFS in your local area (www.findacpapfs.org) if you need assistance in planning with a QTIP trust.


For additional information visit http://www.360financialliteracy.org/