Life and Death Planning for Retirement Benefits

Chapter 6: Leaving Retirement Benefits in Trust

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In some but not all cases, this quiz will give you “the answer” regarding whether a particular trust qualifies (in the author’s opinion) as a see-through. In cases with no definite answer, the quiz will reference the section of this book that explains the issues involved.

PART I: PRELIMINARIES

1. At the time it receives the retirement benefits, will the trust be valid under state law? See ¶ 6.2.05 .

Yes: Go to Question 2. No: Go to Answer A.

2. Is the trust irrevocable, or will it become irrevocable upon the participant’s death? See ¶ 6.2.06 .

Yes: Go to Question 3. No: Go to Answer A.

3. Has a copy of the trust instrument (or alternative permitted documentation) been provided to the plan administrator no later than October 31 of the year after the year of the participant’s death? See ¶ 6.2.08 (A).

Yes: Go to Question 4. No: Go to Answer B. 4.

Does the trust provide that retirement benefits payable to the trust may not be used to pay debts, expenses, or taxes of the participant’s estate, or otherwise be paid to the participant’s estate, after September 30 of the year after the year of the participant’s death (or at all)? See ¶ 6.2.10 . Yes: Go to PART II of the Quiz. No: If the participant is living, amend the trust to include such a provision. If the participant is deceased, “fix” the trust using a cleanup strategy as described in ¶ 6.2.10 . Then proceed to PART II. PART II: BENEFICIARIES AND SUBSTANTIVE TERMS Having dealt with the preliminaries, we now turn to testing the beneficiaries of the trust. In applying this quiz, remember that:  The time to apply these questions is at the moment of the participant’s death. If the participant is still alive, pretend that he dies right now; what would happen to the benefits that would flow into this trust if the participant died right now?  Ignore any beneficiary who dies before the participant, even if he/she is named in the trust. See Example 3, below.  The quiz may not work properly in case of “double deaths,” i.e., where a trust beneficiary survived the participant, but then died prior to complete distribution of his/her trust share. In such cases, see ¶ 4.4.12 .  If the retirement benefits are payable directly to a particular separate trust, share, or subtrust created under the trust instrument as named beneficiary under the participant’s beneficiary designation form, apply these questions ONLY to that particular separate trust, share or