Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

subtrust. See ¶ 6.3.01 (B). Otherwise, see the rest of ¶ 6.3.01 regarding whether to apply these questions to the entire trust. Example 1: Janice’s IRA is payable to “the trust created for the benefit of my son Timmy under Article xxi of the Janice Trust.” Apply these questions to the separate trust that is to be created for the benefit of Timmy, ignoring the other trusts (if any) created under the Janice Trust. (Of course, if upon Timmy’s later death or some other event the assets in his separate trust will flow out to other shares created under Janice’s trust, you may end up having to test all the shares anyway.) Example 2: Godfrey’s IRA is payable to the Godfrey Trust. On Godfrey’s death, the trust divides into a marital trust and a credit shelter trust. You need to test BOTH subtrusts, since the IRA is payable to the single “funding” trust. If (under the terms of the Godfrey Trust, or applicable state law, or as a result of applying a formula or the trustee’s discretion), the IRA ends up being allocated to only one or the other of the two subtrusts, see ¶ 6.3.01 regarding whether you can “ignore” beneficiaries of the other subtrust or share. Example 3: Doris leaves her IRA to a trust that says “Pay income to my husband Corey for life, and on the death of the survivor of my husband and myself distribute the principal outright to my then-living children.” Corey predeceased Doris. Corey is NOT counted as a beneficiary of Doris’s trust. You start your trust testing with ONLY those trust beneficiaries (and potential trust beneficiaries) who are actually living at the participant’s death or may be born later. 5. Test for “conduit trust” status. See ¶ 6.3.05 – ¶ 6.3.06 . Is there one individual beneficiary, or is there a group of individual beneficiaries, who is or are entitled to receive from the trust, directly, upon receipt of such amount by the trust, all amounts (net of applicable fees; see ¶ 6.3.05 (D)) distributed from the retirement plan during that individual’s life (or so long as any member of the group is alive)? If there is (or may be) another beneficiary who is (or may be) entitled to receive part or all of such distributions, but such other beneficiary will have no further interest in the trust or in the benefits as of September 30 of the year after the year of the participant’s death, ignore such other beneficiary; see ¶ 6.3.03 (A)–(C). If such other beneficiary died, see ¶ 1.8.03 (C). If the answer to Question 5 would be “yes” but for the fact that plan distributions may be paid “for the benefit of” (rather than “to”) the conduit beneficiary, see ¶ 6.3.05 (C). If the answer to Question 5 would be “yes” but for the fact that the beneficiary merely has the right to demand payment of such plan distributions to himself, rather than such payment’s being automatically distributed, see ¶ 6.3.12 (A). Florence Example: Florence’s trust says “Following my death, the trustee shall withdraw the annual required minimum distribution RMD) from my IRA each year, and promptly transmit such RMD to my son Beakie, and shall also pay to Beakie such additional amounts from the IRA or other trust assets as the trustee deems advisable.” This trust does not qualify as a conduit trust Yes, there is one single individual beneficiary so entitled: Go to Answer C. Yes, there is a group of individual beneficiaries so entitled: Go to Question 6. No. Go to Question 7. When you answer Question 5: