Well, we made it.  Today is the final day of the 53rd Annual Heckerling Institute on Estate Planning from sunny Orlando, Florida.  Friday is the lightest day of Heckerling as most attendees make their way to the airport to head back home to share with colleagues and clients all the wonderful information they’ve accumulated over the week.

The final day still has a few things to offer, though.

The morning began with Natalie Choate of Nutter, McClennen & Fish in Boston discussing the tax consequences and challenges of dealing with a trust as the beneficiary of a retirement plan.  Mrs. Choate literally wrote the book on this topic!  It is almost always more desirable to name individuals to be beneficiaries of a retirement plan whenever possible.  However, if a trust must be named, there are several considerations.  The trust documents should speak to how the retirement plan will be treated for accounting purposes (what is income, what is principal), and how beneficiaries can access funds inside the retirement plan inside the trust.  The interplay between required minimum distribution (RMD) rules of the retirement plan and the concept of distributable net income (DNI) in the trust can create a lot of confusion if the trust document doesn’t speak to this directly.  If a $500,000 IRA held in the trust passes out a $35,000 RMD in a given year, is that income to be distributed or just a reclassification of principal inside the trust to be held for future beneficiaries?


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The primary reason to name individuals as beneficiaries of retirement plans is to allow the retirement plan to pay out over the beneficiary’s life expectancy (not the decedent’s).  A trust named as the beneficiary can achieve this same result, so long as a few rules are carefully followed.  The five rules are as follows:

  1. The trust must be valid under state law.
  2. The trust is irrevocable or will become irrevocable upon the death of the retirement plan owner.
  3. The beneficiaries of the trust who receive benefits from the retirement plan must be identifiable from the trust instrument.
  4. Certain documentation must be provided to the retirement plan administrator.
  5. All trust beneficiaries must be individuals.

Generally, if these five rules are followed, the RMD rules of the retirement plan see through the trust and the retirement plan works almost as if there was never a trust named as the beneficiary.  There are two differences with the trust involved (vs. individuals named directly as beneficiaries) – beneficiaries cannot get “separate account” treatment (where the plan is effectively split into multiple plans for multiple beneficiaries to better align life expectancies) and a spousal beneficiary cannot take advantage of spousal rollover rules where a spouse can roll the decedent’s retirement plan into their own.

The second session of the morning was a little “inside baseball” as they say – it had to do with the benefit of engagement letters between practitioners and their clients to clearly outline the terms in which the two will work together.  This was more of a “best practices” session for the professionals attending the conference.

Finally, the conference ended with Turnery Berry and Charles Redd giving a great overview of what was discussed during the week.  They highlighted many of the “big topics” from the week.  They discussed the impact of the 2017 Tax Cuts & Jobs Act (TCJA) on estate planning, specifically the elimination of miscellaneous itemized deductions and the changes in tax treatment of alimony payments in divorce.  They reiterated and summarized lots of court cases that are applicable to estate planners related to state income taxation of trusts, charitable distributions from trusts, “death-bed” planning and the modification of trust instruments.  Finally, they went over considerations brought up during the week related to gifting, basis, charitable giving and IRAs.

Heckerling is a great conference, as evidenced by the ever-growing attendance (3,400 attendees this year!) and the top-notch speaker roster.  It fills two huge ballrooms in the largest Marriott in the world.  It’s a long week filled with invaluable insights and practical planning tips for attorneys, wealth planners and accountants.  Withum is proud to field a team of partners to attend this year and every year.  Thank you for following our updates this week. If you would like to talk more about the Heckerling Institute Conference or speak with one of our experts, fill in the form below.


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