If Traditional IRA was used to fund Bypass/Disclaimer Trust, how is it distributed upon surviving spouse death? [NY]

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nyc212
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If Traditional IRA was used to fund Bypass/Disclaimer Trust, how is it distributed upon surviving spouse death? [NY]

Post by nyc212 »

The combination of a cliff and no portability of the New York Estate Exemption ($6,110,000 for 2022), makes estate planning very difficult when the assets of both spouses swings between $11MM - $15MM.

As I understand it, we may use our traditional IRAs (we do not have Roth IRAs), inherited IRAs and 401K, to fund the Bypass Trust, or more technically, a Disclaimer Trust.

I understand that the mechanism to fund the Bypass/Disclaimer Trust is achieved by managing the BENEFICIARY designation of the IRA:
- First name the spouse.
- Then name the current IRA holder's Disclaimer Trust.

Upon the death of the IRA holder (RLT Grantor), the Surviving Spouse may DISCLAIM the IRA, which pushes it into the now deceased spouse's Disclaimer Trust.

QUESTIONS:
1. So what options does the Surviving Spouse have with regard to the IRA RMD and principal now in the Disclaimer Trust?
2. What happens to the several IRAs when the Surviving Spouse dies? Are they supposed to be SPECIFICALLY bequeathed to individual beneficiaries? That would seem very tricky to balance beneficiary allocations when the remaining amount of retirement assets is not known while the estate plan is being created.
3. May the original IRA owner name a THIRD beneficiary, after the Disclaimer Trust, such that if the estate assets swelled to amounts higher than the NY Estate Exemption amount, the trustees of the Disclaimer Trust could DISCLAIM the IRAs????

I've read quite a bit about IRAs and researched a Boglehead's recommendation to look up James Lange's Cascading Beneficiaries, but I'm still not clear.

P.S. Anticipating that some of you may say, retain an attorney for these questions, I have done that. He is active on these boards and he is very good. But working with an attorney is no reason to preclude asking questions and seeking comments/experience from other posters.
nyc212
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