Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

6.4.01 Boilerplate provisions for trusts named as beneficiary................................................... 313 6.4.02 Advance rulings on see-through trust status ................................................................... 314 6.4.03 Should you use a separate trust for retirement benefits? ................................................ 315 6.4.04 Planning choices: Trust for disabled beneficiary............................................................ 315 6.4.05 Planning choices: Trusts for minors ............................................................................... 317 6.4.06 Planning choices: Trust for spouse ................................................................................. 320 6.4.07 Generation-skipping and “perpetual” trusts.................................................................... 322 6.4.08 “Younger heirs at law” as “wipeout” beneficiary........................................................... 323 6.5 T RUST I NCOME T AXES : DNI M EETS IRD ........................................................................ 323 6.5.01 Income tax on retirement benefits paid to a trust............................................................ 323 6.5.02 Trust passes out taxable income as part of “DNI” .......................................................... 324 6.5.03 Trust must authorize the distribution .............................................................................. 326 6.5.04 Trusts and the IRD deduction ......................................................................................... 327 6.5.05 IRD and the separate share rule ...................................................................................... 327 6.5.06 IRD, separate shares, and discretionary funding ............................................................ 329 6.5.07 Income tax effect of transferring plan............................................................................. 330 6.5.08 Funding pecuniary bequest with right-to-receive IRD ................................................... 331 6.6 S EE -T HROUGH T RUST T ESTER Q UIZ .................................................................................. 332 CHAPTER 7: CHARITABLE GIVING ................................................................................ 337 7.1 T HREE “W HYS ”: R EASONS TO L EAVE B ENEFITS TO C HARITY ....................................... 337 7.1.01 What practitioners must know ........................................................................................ 337 7.1.02 Reasons to leave retirement benefits to charity .............................................................. 338 7.1.03 Charitable pledges (and other debts)............................................................................... 340 7.2 S EVEN “H OWS ”: W AYS TO L EAVE B ENEFITS TO C HARITY ............................................ 340 7.2.01 Name charity as sole plan beneficiary ............................................................................ 340 7.2.02 Leave benefits to charity, others, in fractional shares..................................................... 341 7.2.03 Leave pecuniary gift to charity, residue to individuals................................................... 344 7.2.04 Formula bequest in beneficiary designation ................................................................... 346 7.2.05 Leave benefits to charity through a trust......................................................................... 346 7.2.06 Leave benefits to charity through an estate..................................................................... 347 7.2.07 Disclaimer-activated gift................................................................................................. 348 7.3 RMD S AND C HARITABLE G IFTS U NDER T RUSTS ............................................................. 349 7.3.01 Trust with charitable and human beneficiaries ............................................................... 349 7.3.02 If charitable gift occurs at the participant’s death........................................................... 350 7.3.03 If charitable gift occurs later ........................................................................................... 351 7.4 I NCOME T AX T REATMENT OF C HARITABLE G IFTS FROM A T RUST OR E STATE ............ 354 7.4.01 Introduction to trust income tax rules, “DNI,” and the NIIT.......................................... 354 7.4.02 DNI deduction, retirement benefits, and charity............................................................. 356 7.4.03 Charitable deduction under § 642(c)............................................................................... 356 7.4.04 Timing of charitable deduction for trust or estate........................................................... 363 7.4.05 Transfer benefits to charity to avoid “separate share” and other rules ........................... 364 7.4.06 How to name a charity as beneficiary through a trust .................................................... 367

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