Life and Death Planning for Retirement Benefits

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164 Life and Death Planning for Retirement Benefits
benefits that are payable to that estate or trust, does that potential liability represent a possible limit
on the spouse’s ability to take the benefits out of the estate or trust? Most of the PLRs don’t even
mention this subject, but some do mention it and allow the rollover anyway; see PLRs 2001-36030,
2001-30056. In PLR 2009-34046 (allowing the spousal rollover through a trust), the taxpayer
“recited” that all debts, expenses, etc., were paid out of assets other than the IRA; the IRS does not
comment on this aspect.
D. Legal basis for IRS’s position allowing rollovers. The IRS in some of the rulings ( e.g.,
PLR 2004-06048) recites that the Preamble to the Final Regulations provides “that a
surviving spouse who actually receives a distribution from an IRA is permitted to roll that
distribution over ...even if the spouse is not the sole beneficiary .... A rollover may be
accomplished even if IRA assets pass through either a trust or an estate.” However, the
cited Preamble does not contain the second sentence “quoted.” T.D. 8987, 2002-1 C.B.
852.
In most of the rulings, the IRS recites that benefits may be rolled over by a surviving spouse
only if the benefits pass to the spouse from the decedent , and that the general rule is that benefits
that pass to the spouse through an estate or a trust are not deemed to pass to the spouse from the
decedent. Then in each and every ruling the IRS goes on to say that, based on the facts of this
particular case, the IRS will not apply the general rule!
One recent ruling suggested a possible shift towards a more appropriate approach of setting
a standard that all taxpayers can rely on. PLR 2009-34046 stated that “the general rule will not
apply in a case where the surviving spouse is the sole trustee of the decedent’s trust and has the
sole authority and discretion under trust language to pay the IRA proceeds to herself ....” However,
a more recent PLR (2009-35045) goes back to the “this set of facts” language.
3.3 Qualifying for the Marital Deduction
This describes how retirement benefits left to the participant’s surviving spouse, or
to a trust for her life benefit, can qualify for the federal estate tax marital deduction if the surviving
spouse is a U.S. citizen, and provides details on the most-used methods of so qualifying. This
discussion assumes the reader is familiar with the uses and requirements of the federal estate tax
marital deduction, and so explains only how the marital deduction rules apply uniquely to
retirement benefits.
If the participant’s spouse is not a U.S. citizen, additional rules apply that are not covered
in this book; see For more on the marital deduction generally; and details on how to
qualify retirement benefits for the marital deduction if the spouse is not a U.S. citizen, or if using
the less common methods; see the author’s Special Report: Retirement Benefits and the Marital
Deduction (Including Planning for the Noncitizen Spouse) .
For deaths in 2010, see regarding the one-year “repeal” of the federal estate tax.
3.3.01 Road Map: Leaving Benefits to Spouse or Marital Trust
which creates the federal estate tax marital deduction, provides a general rule (the
deduction is allowed for the value of property “which passes or has passed from the decedent to
his surviving spouse”; , followed by an exception to the general rule (no deduction is
allowed if the property that passes to the surviving spouse is a “life estate or other terminable