Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

Tax code effects of sale below market value ....................................................................476 Plan sells the policy to the participant...............................................................................477 Sale to participant: Prohibited transaction issue ...............................................................477 Plan sells policy to the beneficiary(ies).............................................................................478 Sale to beneficiary: Prohibited transaction aspects ..........................................................479 11.4 P LAN -O WNED L IFE I NSURANCE : O THER A SPECTS .................................................................479 Estate tax avoidance: The life insurance subtrust .............................................................479 Avoiding estate tax inclusion and “transfer for value” ....................................................481 Second-to-die insurance .....................................................................................................481 Reasons to buy life insurance inside the plan ...................................................................482 Life insurance and IRAs and 403(b)s ................................................................................483 Planning principles with plan-owned life insurance ........................................................484 Plan-owned insurance and the tax on UBTI .....................................................................485 Plan-owned life insurance subject to spousal ERISA rights............................................485 11.5 P LANNING I DEAS WITH L IFE I NSURANCE AND R ETIREMENT B ENEFITS .................................485 The CHIRA™.....................................................................................................................486 Life insurance for under-age-59½ surviving spouse ........................................................488 Life insurance to protect the “stretch”...............................................................................488 For young parents: Dump the stretch, buy life insurance ................................................489 Can a beneficiary roll over life insurance proceeds? .......................................................489 The “dream” charitable rollover ........................................................................................491 11.6 B IBLIOGRAPHY FOR C HAPTER 11 ............................................................................................491 Checklist: Drafting the Beneficiary Designation .....................................................................497 Introduction to the Forms...........................................................................................................499 1. SIMPLE BENEFICIARY DESIGNATION FORM..........................................................500 1.1. Simple Designation: Spouse, Then Issue............................................................................500 2. MASTER BENEFICIARY DESIGNATION FORMS .....................................................501 2.1 Master Beneficiary Designation: Traditional or Roth IRA ...............................................501 2.2 Master Beneficiary Designation Form: Qualified Plan .....................................................503 2.3 Additional Clauses for Master Beneficiary Designations .................................................504 3. SAMPLE INSERTS FOR MASTER FORMS ..................................................................505 3.1 Benefits Payable to Spouse, “Disclaimable” to Credit Shelter Trust; Different Contingent Beneficiary Depending on Whether Spouse Predeceases or Disclaims ........................................505 3.2 Spouse is Primary Beneficiary; Children are Contingent ..................................................506 3.3 Designating Children (Or Their Issue) as Beneficiaries ....................................................506 3.4 Trust Is Beneficiary, but Only If Spouse Survives ............................................................507 3.5 To Issue; Hold in Trust If below Certain Age ....................................................................507 3.6 Spouse as Primary, Issue as Contingent Beneficiary; Hold in Trust If below Certain Age 507 3.7 Different Beneficiaries for Roth, Traditional, Accounts ...................................................508 APPENDIX A: TABLES .................................................................................................................493 APPENDIX B: FORMS...................................................................................................................496