Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

D. Direct rollover preserves holding period ............................................................ 264 E. 60-day (“indirect”) rollover ................................................................................ 265 5.7.08 DRAC-to-Roth-IRA rollovers: In general ...................................................................... 265 A. Who is eligible .................................................................................................... 265 B. Minimum distribution effects ............................................................................. 265 C. Favorable effect on basis recovery ..................................................................... 266 D. Rollover when basis is higher than market value ............................................... 266 5.7.09 DRAC-to-Roth IRA rollovers: Effect on Five-Year Period ........................................... 266 A. Rollover of a qualified distribution..................................................................... 266 B. Rollover if participant already has a Roth IRA .................................................. 267 C. Danger: Rolling to participant’s first Roth IRA ................................................. 267 5.7.10 DRAC accounting may not shift value ........................................................................... 267 5.7.11 In-plan conversions ......................................................................................................... 268 5.8 P UTTING IT A LL T OGETHER : R OTH P LANNING I DEAS AND P RINCIPLES ........................ 268 5.8.01 Roth plan or traditional? It’s all about the price tag ....................................................... 269 5.8.02 Factors that incline towards doing a Roth conversion .................................................... 271 5.8.03 Factors that incline against a Roth conversion ............................................................... 272 5.8.04 How participant’s conversion helps beneficiaries .......................................................... 273 5.8.05 Annual contributions: Traditional vs. Roth plan............................................................. 274 5.8.06 Roth plans and the estate plan......................................................................................... 275 CHAPTER 6: LEAVING RETIREMENT BENEFITS IN TRUST ................................... 278 6.1 T RUST AS B ENEFICIARY : P RELIMINARIES ........................................................................ 278 6.1.01 Trust as beneficiary: Drafting checklist ......................................................................... 278 6.1.02 Trust accounting for retirement benefits......................................................................... 279 6.1.03 Trust accounting: Drafting solutions .............................................................................. 281 6.1.04 “Total return” or “unitrust” method ................................................................................ 282 6.1.05 Transferring a retirement plan out of a trust or estate..................................................... 283 A. Transferability of retirement benefits ................................................................. 283 B. Examples of fiduciary transfers of inherited retirement plans............................ 284 C. PLRs approving these transfers .......................................................................... 284 D. IRA providers and plan administrators ............................................................... 285 6.1.06 Can a participant transfer an IRA to a living trust? ........................................................ 286 6.1.07 Individual retirement trusts (trusteed IRAs) ................................................................... 286 6.2 T HE M INIMUM D ISTRIBUTION T RUST R ULES .................................................................. 288 6.2.01 When and why see-through trust status matters ............................................................. 288 6.2.02 RMD trust rules: Ground rules ....................................................................................... 289 A. Should you discuss RMDs in the trust instrument.............................................. 289 B. Benefits and proceeds thereof ............................................................................. 290 C. Benefits pass from one trust to another............................................................... 290 D. Who tests compliance? ....................................................................................... 290 6.2.03 What a “see-through trust” is; the five “trust rules” ....................................................... 290 6.2.04 Dates for testing trust’s compliance with rules............................................................... 291