[WSBAPT] Using Community Property Agreement to Equalize Estate Assets in 401K to fund credit shelter trust

[Diane J. Kiepe]

David,

If you just want to use the value and not the actual 401(k) plan asset for funding, I think there is a better way.  It may be too early and maybe I haven’t had enough coffee but if you want to talk about it over a call, I’d be happy to walk you through what we do in similar situations.

Diane J. Kiepe

Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA  99201
djkiepe at depdslaw.com<mailto:djkiepe at depdslaw.com>
509-455-5300

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Derek Jensen
Sent: Tuesday, May 23, 2023 6:14 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Using Community Property Agreement to Equalize Estate Assets in 401K to fund credit shelter trust

I think the income tax on accelerating $500k of income into the credit shelter trust will be more than the Washington Estate Tax Savings.

Sincerely,

Derek W. Jensen, JD, LLM
Jensen Law Office, PLLC


________________________________
From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> on behalf of Diane J. Kiepe <DJKiepe at depdslaw.com>
Sent: Monday, May 8, 2023 7:19 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Using Community Property Agreement to Equalize Estate Assets in 401K to fund credit shelter trust

David

This is more and more common.  A
Sent from my iPhone


On May 8, 2023, at 1:08 PM, David Faber <david at faberfeinson.com> wrote:

I'm working with clients who have a total of about $4mil in assets, about $2.5mil of which is held in a 401K that is, of course, held in just one spouse's name. The spouse who owns the 401K is highly likely to outlive the death of the other spouse. The spouses want to use a credit shelter trust to avoid unnecessary estate taxes at the second death, so my thought was to use a Community Property Agreement with express inclusion of the 401K to equalize assets, then at the death of the first spouse (if they die in the order we presume) we would use the Community Property Agreement and a disclaimer to shunt a portion of the 401K into the Credit Shelter Trust. Has anyone tried this method? We need a method of converting some part into an inherited IRA at the death of the non-owner, and this should theoretically work, but I haven't been able to find any literature on the topic. I presume we might need a court order at the first death directing the division, which I do not anticipate to be a problem, but I want to confirm whether anyone on here has used this method.

Thank you!

Best,
David J. Faber
Faber Feinson PLLC
800 Polk Street, Suite B
Port Townsend, WA 98368
(360) 379-4110

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