Magazine article American Banker

1st Interstate Offers Extended IRA with Estate-Tax Benefits

Magazine article American Banker

1st Interstate Offers Extended IRA with Estate-Tax Benefits

Article excerpt

First Interstate Bank of California's Trust and Private Client Services group has introduced an individual retirement account that extends the time in which assets can accumulate.

The so-called Enhanced IRA also minimizes estate and income taxes for beneficiaries by avoiding lump sum distributions when the client dies. It works by rolling over retirement account assets directly into subaccounts upon the client's death, bypassing estate and related taxes.

Beneficiaries also gain, since funds continue to grow tax-free until they are withdrawn from the account.

The Los Angeles-based banking company's product also takes advantage of California's community property rights to minimize estate taxes for surviving spouses.

By earmarking half the IRA as community property, each spouse's unified estate tax credit is used. These credits allow individuals to give up to $600,000 to beneficiaries with minimal tax consequences. As a result, married couples can leave a maximum of $1.2 million in IRA assets to beneficiaries without incurring estate taxes.

First Interstate is one of the first banks in the United States to offer the Enhanced IRA, according to Douglas F. McRae, manager of First Interstate's personal trust business development staff.

"I haven't heard of anyone else" offering this product, said Paul J. Groncki, vice president at Payment Systems Inc., a Tampa-based firm that tracks the private banking business.

IRAs "haven't traditionally been used as trusts that incorporate estate planning techniques," Mr. McRae said. "What First Interstate is doing is a good idea," Mr. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.