Life and Death Planning for Retirement Benefits

Table of Contents

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4.4 Q UALIFIED D ISCLAIMERS OF R ETIREMENT B ENEFITS .................................................... 200 4.4.01 Post-mortem disclaimer Checklist .................................................................................. 200 4.4.02 Requirements for qualified disclaimer: § 2518............................................................... 201 4.4.03 Income tax treatment of disclaimers ............................................................................... 201 4.4.04 What constitutes “acceptance” of a retirement benefit ................................................... 202 4.4.05 Effect of taking a distribution; partial disclaimers.......................................................... 204 4.4.06 Deadline for qualified disclaimer.................................................................................... 205 4.4.07 To whom is the disclaimer delivered? ............................................................................ 206 4.4.08 Who gets the disclaimed benefits and how do they get them? ....................................... 206 A. Property must pass to “someone other than” disclaimant................................... 206 B. Property must pass “without direction” by disclaimant...................................... 207 C. How to determine who gets the disclaimed benefits .......................................... 207 4.4.09 Disclaimers, ERISA, and the plan administrator ............................................................ 208 A. Disclaimers and ERISA’s anti-alienation rule .................................................... 208 B. Disclaimers and the plan document .................................................................... 209 C. Effect of the plan’s “state law” provision ........................................................... 210 4.4.10 Disclaimers and the minimum distribution rules ............................................................ 210 4.4.11 How a disclaimer can help after the participant’s death ................................................. 210 4.4.12 Double deaths: Disclaimer by beneficiary’s estate ......................................................... 211 A. Who is the successor beneficiary? ...................................................................... 212 B. If the fiduciary is also a beneficiary.................................................................... 212 4.4.13 Building disclaimers into the estate plan: Checklist ...................................................... 212 4.5 O THER C LEANUP S TRATEGIES ......................................................................................... 214 4.5.01 Check the plan’s default beneficiary............................................................................... 215 4.5.02 Invalidate the beneficiary designation ............................................................................ 215 4.5.03 Spousal election to take share of estate........................................................................... 215 4.5.04 Will (or beneficiary designation form) contest ............................................................... 216 4.5.05 Reformation of beneficiary designation form................................................................. 216 4.5.06 Reformation of trust or will ............................................................................................ 217 4.5.07 Choose the right cleanup strategy ................................................................................... 218 A. When to seek reformation and avoid disclaimer................................................. 219 B. When and how to use disclaimer ........................................................................ 219 4.6 I NCOME IN R ESPECT OF A D ECEDENT (IRD) ................................................................... 219 4.6.01 Definition of IRD; why it is taxable ............................................................................... 220 4.6.02 When IRD is taxed (normally when received) ............................................................... 220 4.6.03 Tax on transfer of the right-to-receive IRD .................................................................... 220 A. Gift of right-to-receive IRD................................................................................ 221 B. Transfer from estate or trust to beneficiary......................................................... 221 C. Transfer to a 100 percent grantor trust................................................................ 221 4.6.04 Income tax deduction for estate tax paid on IRD ........................................................... 221 4.6.05 Who gets the § 691(c) (IRD) deduction.......................................................................... 222 4.6.06 IRD deduction for deferred payouts ............................................................................... 223 4.6.07 IRD deduction: Multiple beneficiaries or plans.............................................................. 224