Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

A. Spousal rollover of all types of plans through estate, trust, or both. Here is a partial list of PLRs approving the spousal rollover under these circumstances for various types of retirement plan benefits through the participant’s estate, a trust, or both ( i.e., where benefits are paid first to the participant’s estate, thence to a pourover trust, and from there to the spouse). PLRs involving IRAs as community property include 2009-35045 and 2009- 50053. Estates: IRA payable to estate: PLRs 2002-10066, 2002-36052, 2004-06048; IRA annuity payable to estate: 2004-05017; 403(b) plan or annuity payable to estate: 2002-10066, 2002-49008, 2003-14029, 2003-17040; defined benefit plan payable to estate: 2003-05030; QRP payable to estate: 2002-11054, 2002-12036. Trusts: IRA payable to a trust: 2001-30056, 2002-42044, 2009-34046, 2009-35045, 2009- 50053; portion of IRA payable to a trust (where the rest of the IRA was payable, through the same trust, to other beneficiaries): 2004-49040; QRP payable to a trust: 2002-08031. See also PLR 1999- 18065. Generally, the surviving spouse must roll the money over within 60 days after it is distributed from the decedent’s plan, but (as with other rollovers; see ¶ 2.7.05 – ¶ 2.7.07 ) the spouse can obtain a waiver of the 60-day deadline in cases of hardship. See PLR 2004-05017. Alternatively, the spouse can effect the rollover using a direct trustee-to-trustee transfer ( ¶ 2.6.01 (E)); see, e.g. , PLR 2009-50058. If the distribution is from a QRP and the plan withholds income taxes from the distribution, the spouse can “roll over” the withheld tax money by substituting other funds. PLR 2003-44024, citing Reg. § 1.402(c)-2 , A-11. Of course, the spouse cannot roll over any portion of the distribution that constitutes an RMD; see ¶ 2.6.03 and PLR 2009-35045. B. No rollover if spouse’s rights limited by standard or subject to third party discretion. In PLR 2006-18030, the surviving spouse was entitled under the trust terms only to income necessary for health, support, etc.; the rollover was denied because the spouse was not the sole “payee” of the IRA payable to the trust. See also PLR 2009-44059. However, if the surviving spouse herself is the trustee who exercises the discretion to allocate and/or pay the benefits to herself , the rollover is allowed. See PLRs 2009-34046, 2009-35045, 2009- 50053. C. Partial rollover allowed if only some of the benefits meet the requirements. See PLR 2004-49040, in which the spousal rollover was allowed for the portion of the IRA payable to the surviving spouse through a trust, where the rest of the IRA was payable, through the same trust, to other beneficiaries. In PLR 1999-18065, the decedent’s IRA could apparently have been allocated either to the marital trust (which the surviving spouse had the right to withdraw) or to the credit shelter trust (of which the surviving spouse was only the life beneficiary), and the surviving spouse was not the sole trustee (she was co-trustee with a corporation). The IRS allowed the rollover only for the portion of the IRA that exceeded the amount ($620,000) that could have been allocated to the Estate and trust: IRA payable to an estate which passed to a trust: 2001-36031.