[WSBAPT] Community Property/Marital Trust Questions

[Natalie Kuehler]

Hello all,

I am sure the answers to this are straightforward, but I can’t seem to think this one through properly:

I have an estate that consists entirely of community property valued at $6m. Of that, $4m is held in IRAs, $3.6m of which is in an IRA in W’s name only; the remaining $400k in an IRA in H’s name only. The IRAs name the other spouse as a beneficiary. H dies, and in his Will leaves all of his interest in the couple’s community property to a Marital Trust, the initial beneficiary of which is W. The Marital Trust contains a limited power of appointment for W (to H and W’s daughter or charitable organizations only). This raises the following questions:


  1.  Does the limited power of appointment prevent treatment of the Marital Trust as a bypass trust for WA estate tax purposes?
  2.  Does the Marital Trust need to funded with $3m in assets (1/2 of all of the community property), or can it be funded with less? Specifically, can all of W’s IRA stay in her name, or does a portion of that need to be transferred to the Marital Trust because that IRA alone makes up more than 50% of the community property? I am trying to avoid that result given the negative tax consequences that would be triggered.

Any pointers – or referrals – would be greatly appreciated.
Thank you!

Natalie


Natalie N. Kuehler
THE KUEHLER LAW FIRM PLLC
PO Box 3059 – 1112 State Route 20
Winthrop, WA 98862
o: (509) 996-2832 x1 – c (509) 557-5769
www.kuehlerlaw.com<http://www.kuehlerlaw.com>

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