Case # 6:      IRA to Three-Life Unitrust

Ann D. of Lake Worth, Florida has three children and an estate of $2.1 million. She has an IRA that has grown to $1.2 million, and other property valued at $900,000. Ann would like to provide some principal to the children and then income for life. One of her three children has a long history of poor money management. Ann wants to treat her three children equally, but believes that this child will benefit from lifetime income.

The trust planner creates a four-life unitrust that is unfunded. The charitable remainder is over 10%, so the trust is a qualified unitrust. She changes the beneficiary of her IRA to the trustee of the unitrust. When she passes away, the $1.2 million IRA is distributed to the trustee of the unitrust for the three lives of the children.

The children receive the balance of the estate outright, with each child receiving over $250,000. Each of the three children then receives one-third of the unitrust income.

Over the lives of the children, the $1 million unitrust will pay approximately $2.5 million of income. Each child will receive about $800,000 of income during his or her lifetime. After all three children have passed away, approximately $2.4 million will be available for charity.