Life and Death Planning for Retirement Benefits

334

Life and Death Planning for Retirement Benefits

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)?

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:

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 because the trustee is required to transmit to Beakie only RMDs, not ALL distribution the trustee receives from Florence’s IRA. Answer NO to Question 5. Rhett Example: Rhett’s trust says “Following my death, the trustee shall pay $10,000 to Charity X, no later than September 30 of the year after the year of my death; and the trustee shall withdraw the annual required minimum distribution RMD) from my IRA each year, and such additional amounts as the trustee deems advisable, and shall promptly transmit such RMDs and additional amounts (if any) to my son Bip.” Ignore Charity X and Answer YES to Question 5. 6. We have established that there is a “conduit trust” for the benefit of more than one individual. Of the group of individual “conduit” beneficiaries, is it possible to identify, at the time of the participant’s death, which member of the group has the shortest life expectancy? See ¶ 6.2.07 .

Yes: Go to Answer D. No: Go to Answer A.

7. We have established that the trust is not a “conduit” trust with respect to an individual beneficiary (or group of individuals), so the trust is an “accumulation” trust. We next test whether the trust qualifies as a see-through under one of the qualification methods available to accumulation trusts. Does one individual trust beneficiary have the absolute right to withdraw all assets from the trust at any time?