Life and Death Planning for Retirement Benefits

Chapter 11: Insurance, Annuities, and Retirement Plans

491

the regulation has been amended several times since then, including after these other things became effective (most recent amendment was in 2009), and this particular provision was not changed. Therefore the conclusion is that someone should try this and let the rest of us know how it turns out.

The “dream” charitable rollover

Charities dream of a “charitable IRA rollover” law that would allow lifetime transfers directly from an IRA to a charity or charitable remainder trust under certain conditions. This would enable the charitably-inclined individual to fund his charitable intentions immediately with IRA funds; he would get no tax deduction, but also would not have to report the IRA distributions as gross income. Though § 408(d)(8) has allowed, temporarily (2006–2014 only), some limited direct IRA- to-charity transfers, this was a far cry from the law envisioned by charities, under which (if ever enacted) a charitably-inclined participant could transfer his IRA to a charitable remainder trust (CRT). The CRT would receive the funds income tax-free, then pay a unitrust or annuity income to the participant for his life, then to his spouse for her life. When both spouses died, the funds would pass to the participant’s chosen charity. For requirements and advantages of a CRT, see § 664 and ¶ 7.5.04 . The participant and spouse would get a life-long stream of income that would be somewhat steadier than an RMD payout from an IRA (and also would be longer-lasting, if they live into their mid 90s or beyond), and satisfy their charitable intent. No income or estate taxes would ever be paid on the IRA balance (though the annual distributions from the CRT would be taxable). The spouses could provide a replacement asset for their descendants by buying life insurance (via gifts to an irrevocable trust) with some of the income stream they received from the CRT. The life insurance also would never be subject to income tax or estate tax. However, this is still just a pipe dream. See generally, Zaritsky, H., and Leimberg, S.L., Tax Planning with Life Insurance , Warren, Gorham & Lamont. The best one-volume reference work for ERISA questions is The Pension Answer Book, by Stephen J. Krass, Esq.; new edition published annually. The Pension Answer Book is geared towards employers and plan administrators and their advisors. Chapter 15 deals with life insurance in plans. A Panel Publication of Aspen Publishers, Inc., 7201 McKinney Circle, Frederick, MD 21704, 800-638-8437; www.panelpublishers.com. For an excellent discussion of life insurance in the retirement plan, see Beverly R. Budin, Esq., Life Insurance , T.M. 826. Regarding “subtrusts,” see: “The Qualified Plan as an Estate Planning Tool,” by Andrew J. Fair, Esq., booklet distributed by Guardian Life Insurance Co. Of America, 201 Park Ave. South, New York, NY 10003. “Estate Tax on Life Insurance Held in Qualified Plans,” by Mervin M. Wilf, Esq., in Retirement Plan Trio seminar 6/22/95, materials published by ALI-ABA, 4025 Chestnut St., Philadelphia, PA 19104-3099 (Publ. No. Q239). 11.6 Bibliography for Chapter 11