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Distribution Planning for IRA Beneficiary Trusts: Navigating RMD Rules to Maximize Stretch Treatment

Avoiding Errors in Measuring Life Calculations, Using Payouts and Disclaimers, and Separate Shares

Recording of a 90-minute CLE webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, November 19, 2019

Recorded event now available

or call 1-800-926-7926

This CLE course will provide estate planning counsel and fiduciary tax advisers with practical guidance in navigating the rules governing distributions from IRAs where the beneficiary is a qualified trust. The panel will outline the required minimum distribution (RMD) rules for inherited IRAs, discuss how to identify and measure the distribution period where a qualified trust is the IRA beneficiary, and detail the application of the separate share rule to address multiple beneficiaries.

Description

A significant challenge for many estate planners and fiduciary advisers is the complexity in applying the RMD rules for IRAs and qualified plans in circumstances where the beneficiary of the account is a qualified trust with one or more beneficiaries. IRC 401(a) requires that the balance of a qualified account must be distributed "over a period not extending beyond the life expectancy of the participant and a designated beneficiary."

When the beneficiary of a participant's IRA is a qualified trust, several issues confront estate planning counsel structuring or administering the trust, most notably in determining how to maximize growth and deferral benefits through managing distributions. Establishing which beneficiary serves to identify the "measuring life" of 401(a) can create unexpected tax consequences, particularly if there are contingent beneficiaries, no matter how remote the contingency may be. Advanced planning for a plan participant is essential to optimize the benefits of a qualified trust as the beneficiary of an IRA.

Estate planning counsel should have a working knowledge of how the RMD rules are structured, primarily as they apply to IRA and qualified accounts with trusts as beneficiaries. Having a clearly articulated distribution strategy in designing a beneficiary trust can stretch the growth period of the IRA assets over an extended time with greater net benefit as well as provide for some additional non-tax benefits.

Listen as our experienced panel provides a thorough and practical guide to planning for the distribution rules and opportunities within IRA beneficiary trusts, focusing on beneficiary designation to preserve stretch treatment of IRA assets.

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Outline

  1. Overview of IRA beneficiary trusts (conduit and accumulation)
  2. RMD rules
  3. Separate share rule application
  4. Distribution strategies
    1. Determining when RMD measuring life calculations are most beneficial (or irrelevant)
    2. Disclaimers
    3. Payout provisions

Benefits

The panel will review these and other key topics:

  • Structuring an IRA beneficiary trust to ensure maximum stretch treatment by factoring beneficiaries' measuring lives
  • How the RMD rules work in cases of IRA shelter/conduit trusts
  • How to use payouts and disclaimers in post-mortem planning to utilize younger recipients in determining measuring lives for RMD rules

Faculty

LaMendola, Salvatore
Salvatore J. LaMendola
Member
Giarmarco Mullins & Horton

Mr. LaMendola specializes in charitable planning and planning for retirement plan benefits. He is the editor of the...  |  Read More

Lynch, Kristen
Kristen M. Lynch
Partner
Lubell Rosen

Ms. Lynch represents clients in matters related to probates, guardianships, estate planning, asset protection,...  |  Read More

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