Joint Revocable Family Trust in Community Property State?
Something new to me.
Client lives in a community property state and I don't know much about such since I don't practice in a community property state and the fact that I have never had a "joint" family revocable trust to deal with.
Husband and Wife had/have a joint revocable trust in the name of "The [family last name] Revocable Trust" with husband and wife as co-trustees (hereafter referred to as the family trust). Beneficiaries of the family trust are the husband and wife's 2 adult children.
Husband died in 2006 after required minimum distributions from an IRA account had begun in prior years and his IRA listed their joint family trust as the beneficiary. The attorney after death amends the family trust to remove the husband's name. No husband estate tax return required, no 1041 requirement expected but not yet determined.
The family trust has a paragraph that gives the trustee rights to determine the manner and timing of payments (received as a beneficiary) by lump sum or otherwise as permitted under IRC §401(a)(9).
The questions asked here:
1. Since the family trust is still a revocable trust (with wife only trustee due to amendment) does the required minimum distributions received by the family trust simply get reported on the family trust grantor wife's 1040, page 1, line 15 or 16, ignoring the family trust as such?
2. Does the death of the husband create a separate irrevocable trust that must be reported on a 1041 for some reason? I think not as the distributions received are by the family trust as a beneficiary.
3. Is the full amount of the retirement account taxable in the year of death or does the minimum distributions only get taxed by the wife as received and stated in question 1 ?
4. Is the required minimum distribution calculated over the life of the wife or beneficiary of the revocable family trust (oldest adult beneficiary in this case a child of the wife), or continue on the same method as was the dead husband that was receiving distributions at time of death?
All opinions would be appreciated. Thanks, OldJack.
Last edited by OldJack; 02-08-2007 at 02:58 PM.
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