Life and Death Planning for Retirement Benefits

14

Life and Death Planning for Retirement Benefits

Problems paying the estate tax ............................................................................................213 Alternate valuation method (AVM) for retirement benefits..............................................214 AVM, cont.: Distributions, other IRA events as “disposition” .........................................214 AVM, cont.: Sale of assets inside the IRA .........................................................................217 Federal estate tax exclusion for retirement benefits...........................................................217 Valuation discount for unpaid income taxes ......................................................................217 Deaths in 2010: One-year “repeal” of the federal estate tax .............................................218 4.4 Q UALIFIED D ISCLAIMERS OF R ETIREMENT B ENEFITS ............................................................219 Post-mortem disclaimer checklist .......................................................................................219 Requirements for qualified disclaimer: § 2518 ..................................................................220 Income tax treatment of disclaimers ...................................................................................220 What constitutes “acceptance” of a retirement benefit ......................................................221 Effect of taking a distribution; partial disclaimers .............................................................223 Deadline for qualified disclaimer ........................................................................................224 To whom is the disclaimer delivered? ................................................................................225 Who gets the disclaimed benefits and how do they get them? ..........................................225 A. Property must pass to “someone other than” disclaimant .....................................225 B. Property must pass “without direction” by disclaimant ........................................226 C. How to determine who gets the disclaimed benefits .............................................226 Disclaimers, ERISA, and the plan administrator ...............................................................227 A. Disclaimers and ERISA’s anti-alienation rule .......................................................227 B. Disclaimers and the plan document ........................................................................228 C. Effect of the plan’s “state law” provision ..............................................................229 Disclaimers and the minimum distribution rules ...............................................................229 How a disclaimer can help after the participant’s death ....................................................229 Double deaths: Disclaimer by beneficiary’s estate ............................................................230 A. Who is the successor beneficiary? ..........................................................................231 B. If the fiduciary is also a beneficiary .......................................................................231 Building disclaimers into the estate plan: Checklist ..........................................................231 4.5 O THER C LEANUP S TRATEGIES .................................................................................................233 Check the plan’s default beneficiary...................................................................................234 Invalidate the beneficiary designation ................................................................................234 Spousal election to take share of estate...............................................................................234 Will (or beneficiary designation form) contest ..................................................................235 Reformation of beneficiary designation form ....................................................................235 Reformation of trust or will .................................................................................................236 Choose the right cleanup strategy .......................................................................................237 A. When to seek reformation and avoid disclaimer ...................................................238 B. When and how to use disclaimer ............................................................................238 4.6 I NCOME IN R ESPECT OF A D ECEDENT (IRD) ...........................................................................238 Definition of IRD; why it is taxable....................................................................................239 When IRD is taxed (normally when received) ...................................................................239 Tax on transfer of the right-to-receive IRD........................................................................239