Bruce Steiner

It's not clear that this was intended to override treating IRAs as if they passed directly to the spouse (rather than through an estate or trust) in those situations in which the IRS would have issued a favorable ruling prior to the new proposed regulations. From a planning standpoint, if you want to leave your IRA to your spouse, it's much simpler to name your spouse as the beneficiary. I never understood why some IRA owners set up such complicated estate plans and beneficiary designations when they could have simply named the spouse as beneficiary. If the IRA owner has already died, if there is any uncertainty, you might want to apply for your own PLR.

There are actually quite a number of PLRs dealing with spousal rollovers where the spouse is not the named beneficiary, some favorable and some not. I analyzed these PLRs in my article on this subject in the October 1997 issue of Estate Planning. I don't see anything in the new proposed regulations indicating a change in the IRS' view of spousal rollovers where the spouse is not the named beneficiary.

2. I am not aware of any PLRs in which the existence of multiple IRAs was relevant. 3. Where there are some assets other than IRAs, some of the PLRs require that other assets go to the marital share to the extent possible, and some don't. But you say you don't have any non-IRA assets. 4. I don't know of anything other than the PLRs. But by now there are enough PLRs that you can get a sense of the IRS' thinking, even though PLRs are not binding except as to the taxpayers to whom they were issued. At the risk of sounding critical, if the decedent died in 1999, and actions must be taken by 12/31/00, these issues might have been raised sooner. If the credit shelter is pecuniary, you may want to consider whether you think that funding the credit shelter amount with the right to receive IRA benefits will accelerate the income tax. The beneficiaries of the credit shelter trust might have considered disclaiming their interests in the credit shelter trust, so as to permit the spouse to roll over the entire IRA, thus obtaining greater income tax deferral, at the cost of giving up the credit shelter. Whether you think the funding of a pecuniary credit shelter with the right to receive IRA benefits accelerates the income may affect your thinking on this issue. However, since more than 9 months have passed since the decedent's death, this option is no longer available.

If you can't get a copy of my article from the law firm you were at before 1999, or some other law firm in your area with a tax/estates practice, let me know and I'll send you a copy. The second part of the problem is the easier part. Since the spouse has the power to withdraw all of the assets of the marital trust, the marital trust is essentially disregarded. The first part of the problem is often the harder part. But if in fact the decedent had no other assets other than the IRAs, then you don't have to deal with the issue of whether some nonretirement assets could have gone to the marital share. If the amount involved is significant, or if the IRA trustee/custodian won't let you do what you want without a ruling, then you may want to obtain your own ruling. In doing the research for my article, I was amazed at how often this fact pattern occurred. It seemed like one would have to make a great effort to create such a fact pattern. I don't understand why anyone would create a marital trust in which the spouse has the power to withdraw all of the trust assets. It would seem that one would leave the marital share either outright or in a QTIP trust, but not in this type of trust. I also don't understand why anyone would go through all this complexity instead of simply leaving the IRA to the spouse, with the credit shelter trust as the contingent beneficiary; or, alternatively, leaving to the credit shelter trust the share of the IRA benefits necessary to fully fund the credit shelter trust, and the balance of the IRA benefits to the spouse.

As to question 1, see my article on this subject in the October 1997 issue of Estate Planning.

Good tax/estates lawyers shouldn't be that hard to find [g]. The law will likely permit your daughter to stretch the benefits out over her life expectancy. But the plan might not. But before she takes the money out, she should make absolutely sure that the plan doesn't. You didn't say whether you and your daughter's father are married to each other. If so, it may be possible to get the pension benefits payable to you, in which case you would be able to roll them over into your own IRA, potentially convert to a Roth IRA, and designate your daughter, or a trust for her benefit (or whomever you want) as beneficiary, thus achieving a great deal of income tax deferral. I wrote an article on spousal rollovers where the spouse is not the named beneficiary. It appeared in the October 1997 issue of Estate Planning. The lawyer handling your daughter's father's estate, or the lawyer handling your estate planning, should subscribe to this publication.

Municipal bonds maturing after 2001 and not callable in 2001.

I wrote an article on this subject in the October 1997 issue of Estate Planning, in which I cited dozens of relevant PLRs. The lawyer handling the deceased spouse's estate should subscribe to this publication. Whether the spouse can roll over the benefits turns on the particular facts. You said that the estate was the default beneficiary, but you did not explain how the spouse then inherited it through the estate.

In addition to the IRS user fee for a ruling (which is several thousand dollars, with an exception for low income taxpayers), it also costs several thousand dollars in legal fees to prepare the ruling request. If you are having a problem dealing with the IRA custodian, a ruling may help you in that regard. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

No, the column itself is not online. The website is that of CCH, the publisher of the Journal of Retirement Planning. The best way to make sure you get all of my future columns is to subscribe to the publication. If you want a copy of any of my previous columns, let me know which one(s) and where to mail them. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

The prohibited transaction rules can be quite complicated. You should consult comptent tax/estates counsel. There are several trust companies which will permit private investments in IRAs. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

See my column on this subject in a recent issue of the CCH Journal of Retirement Planning www.cch.com. Where you don't have enough nonretirement assets to fully fund the credit shelter trust, there is a tradeoff between the income tax benefits of a rollover (if you leave the retirement benefits to the spouse) and the potential estate tax benefits of leaving retirement benefits to the credit shelter trust to the extent necessary to fully fund it. You may wish to associate with competent tax/estates counsel. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

In the news stories about the sale of the stock of the former employer/now competitor from the qualified plans, the discussion focused upon the investment decision and whether the sale was made based upon the interests of the employer rather than the interests of the participants, and whether the participants should have been given the opportunity to roll the stock into their own IRAs. But I didn't see any discussion of the special tax treatment for employer stock. Is or could that also be an issue in the case? ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

Ask the lawyer who handles your estate planning to give you a copy of my article on this subject in the January 2000 issue of Estate Planning magazine. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

There was a case about a year ago in which the New York County Surrogate's Court allowed a provision in a Will to override the default provision in the IRA, where the IRA custodian waived strict compliance with the terms of the IRA agreement. This is still two steps away from allowing the Will to override a beneficiary designation. In the court case, the Will was overriding a default provision rather than a specific beneficiary designation. Also, in the court case, the IRA custodian waived strict compliance with the terms of the IRA agreement (though it's hard to see why this should matter, since the IRA custodian is really just a stakeholder with no economic interest in the outcome other than to make sure it's protected against having to pay out twice). An argument could be made that it might be useful to be able to override beneficiaries by Will. An ill person needing to revise his/her estate plan quickly might not be able to obtain beneficiary designation forms for all of his/her nonprobate assets, and it would be simpler if he/she could override his/her beneficiary designations by Will. If the IRA (or other nonprobate asset such as qualified plan benefits or life insurance) is sufficiently flexible, the owner could change the beneficiary by letter, but some IRAs, etc., might not be sufficently flexible. The concern may be that IRA custodians ought to be able to rely upon the beneficiary designation in their records. However, this concern could be alleviated by protecting the IRA custodian who pays out to the beneficiary on its records, and leaving the beneficiary under the Will to pursue the designated beneficiary. A similar issue arises upon divorce. In many states, a divorce revokes the provisions for the former spouse under the Will, but does not revoke nontestamentary dispositions for the former spouse. Some states are considering legislation to have divorce revoke nontestamentary dispositions for the former spouse. Except in the case of qualified plan benefits (under the Supreme Court decision in Boggs), a similar issue can arise in community property states, where nonprobate assets may be payable to a designated beneficiary, but the spouse may have a community property interest in the benefits. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

See my article on this subject in the January 2000 issue of Estate Planning. The lawyer who handles your estate planning should subscribe to this publication ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

Taxpayer had a large traditional IRA, which she intended to convert to a Roth IRA over a number of years, beginning 1999 and ending the year before reaching age 70 1/2, so as not to be in the highest income tax bracket in any year. She converted some in 1999, and some in 2000, and now finds that her income went over $100,000 in 1999. So she has to recharacterize the 1999 conversion, along with the "income" thereon. The calculation would be simple if she had not yet done the conversion for 2000 (into the same account). But it's made more complicated by the fact that she already did the conversion for 2000. The regulations appear to say that she simply has to write to the IRA custodian (in this case, a large brokerage firm) to have them recharacterize the 1999 contribution plus the "income" thereon. This would leave it up to the IRA custodian to do the calculation. What is the best way to handle this? ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

It may be worth a try. I use Excel and the Brentmark Pension and Roth analyzer www.brentmark.com. But I find that in most cases the choices are determined more by the client's objectives than by a spreadsheet. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL [This message has been edited by Bruce Steiner (edited 02-19-2000).] [This message has been edited by Bruce Steiner (edited 02-19-2000).]

Barry is correct (as usual) that once the participant dies, there isn't anything the beneficiary can do. But if the plan so permits, the participant could take his/her money out during lifetime and roll it over into an IRA. And if the plan doesn't permit the participant to take his/her money out during lifetime, the participant might want to consider naming a charitable remainder trust as beneficiary. This technique is more common when someone is past the required beginning date, named the spouse as beneficiary, elected recalculation and the spouse died first. But it would work in a similar fashion in this situation ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

Obviously the balance at her death has to go to someone. Ignoring any issue of potential creditors, it doesn't make much difference whether she picks who she wants to leave it to by filing a beneficiary designation with the IRA custodian or by making a provision in her Will. If she would prefer to do it by beneficiary designation, and the IRA custodian won't let her do it that way, she should move the account to a different custodian. If anyone on this group works for an IRA custodian, you have a tremendous marketing opportunity if you can make your IRAs customer friendly. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

You might want to apply for permission to make a late reconversion under Treas. Reg. § 1.9000. You might have a better case if the income shown on the return were under $100,000, but was increased to over $100,000 on audit. In this case, presumably he knew when he filed his return (which was due before 12/31/99 even if it were on extension, assuming he was in the United States) that his income was over $100,000. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

If Danmar believes his/her institution is not a problem for IRA owners, he/she should tell us the name of his/her institution, and I'm sure many attorneys will send him/her lots of business. We keep hearing so many horror stories involving IRA trustees/custodians that it would be nice to know if there is a customer-friendly one. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

Danmar: would you be good enough to tell us the name of your institution, so we can point out to our clients this problem with your institution? Are there *any* financial institutions that are easy to deal with for IRAs? There continues to be a marketing opportunity for anyone connected with a financial institution to attract IRA business. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

What is the relevance of your being only 44? See my column on this subject in the May/June 1998 issue of the CCH Journal of Retirement Planning. For information on this magazine, see www.cch.com. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL

See my column on this subject in the January/February 2000 issue of the CCH Journal of Retirement Planning. For information on this publication, see www.cch.com. If you have sufficient other assets to fully fund your credit shelter trust, the issue will not arise. If you do not have sufficient other assets to fully fund your credit shelter trust, there is a tradeoff. Using your Roth IRA to fund the portion of the credit shelter remaining after using your other assets avoids wasting the balance of the credit shelter. However, you give up some income tax deferral (since the spouse could roll it over into his/her own Roth IRA and name new beneficiaries). As one person suggested, you can postpone the decision by naming the spouse as primary beneficiary and the credit shelter trust as contingent beneficiary. However, the tradeoff here is that a disclaimer trust is less flexible than a mandatory credit shelter trust, since the spouse can't have a power of appointment over a disclaimer trust, and can't participate in discretionary distributions to others from the trust in his/her capacity as a trustee. ------------------ Bruce Steiner, attorney (212) 986-6000 (NY office) (201) 862-1080 (NJ office) also admitted in FL