Peter Foley wrote:I do not know if this is an acceptable approach or not, but can't you designate a specific acount as payable on death to your children (or beneficiary for certain accounts) instead of your spouse? For example, designate your IRA (or Roth or 401k) to go to your children so as to reduce the size of the estate of the survivor? If this is allowable it would only help to address the estate tax issue for the surviving spouse, not the gifting issue you raise.
ERISA says you need your spouse's permission to name someone other than your spouse as the beneficiary if you have a "plan" covered by ERISA. How's that for circular? Also, the Supreme Court has ruled that plan rules can override beneficiary designations if such designation does not comport with plan rules. (two in a row, plus I got to use comport; I'm on a roll.)
http://www.dol.gov/ebsa/faqs/faq_consum ... N4jDKXMaU4
In most 401(k) plans and other defined contribution plans, the plan is written so different protections apply for surviving spouses. In general, in most defined contribution plans, if you should die before you receive your benefits, your surviving spouse will automatically receive them. If you wish to select a different beneficiary, your spouse must consent by signing a waiver, witnessed by a notary or plan representative.
Just for some fun letters:
Section 1457(a)(1) of the SBJPA directs the Secretary to publish sample language that can be included in a form that is used for a spouse to consent to a participant's waiver of a QJSA or QPSA. This sample language for use in spousal consent forms is contained in Notice 97-10 in this Bulletin.
And finally, this post would not be complete if I didn't let you read Notice 97-10:http://www.unclefed.com/Tax-Bulls/1997/Not97-10.pdf