There are a number of different structures to consider when designing the estate plan for a married couple who own IRAs or other qualified retirement plans. In a perfect world, the ideal structure would minimize estate tax, provide the protection of an irrevocable trust at the first death (if that is what the clients want), and facilitate maximum deferral under the minimum distribution rules that apply to IRAs and other qualified plans.
However, real world planning under the minimum distribution rules often forces a balancing of competing interests to determine the optimal structure. To obtain the tax savings of a credit shelter trust or the protection of a marital QTIP trust, deferral may be lost. What is the “cost” of giving up the benefit of deferral? That is the focus of this article. (A separate issue not addressed in this article is the dilemma of avoiding waste of the first spouse’s applicable exclusion amount when a large portion of the estate consists of IRAs or retirement plans. Hopefully this important topic can be covered in another article.)