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Heard at Heckerling 2022 - Day 5

The final day of the Heckerling Institute on Estate Planning conference is always short day but with Natalie Choate speaking on retirement benefits, it certainly was not a light day!

  • While Natalie’s presentation was supposed to be about planning with retirement benefits, she had to refocus when the IRS issued proposed regulations relating to required distributions to beneficiaries under the SECURE Act. One of the most concerning items included in the proposed regulations is a required minimum distribution for beneficiaries who elected to take a distribution under the ten-year rule. The IRS has not specifically stated how to deal with beneficiaries who elected the ten-year payout in 2021 and, under the guidance available at that time, did not take an RMD in 2021. We were advised to warn such clients that they might be required to take a catch-up distribution in 2022.

  • The proposed regs also provide guidance on the use of see-through trusts as beneficiaries of qualified plans. Particularly, they address who is the designated beneficiary and when might a second-tier beneficiary disqualify or alter the payout schedule for a trust. There is now (potentially) clarity on when a minor is a beneficiary of a plan, either directly or through a see-through trust.

  • The IRS has also appeared to have some very generous provisions for post-death modifications of see-through trusts. They may even allow a trust to be modified solely to minimize taxes. Not sure that is the actual intended result or if these provisions will be modified before adoption.

  • Natalie finished by saying that such trusts should be drafted with the maximum flexibility for post-death charges, and if you have a trust with sub-trusts for separate beneficiaries, name each sub-trust as a beneficiary.

It was another great week at Heckerling! Now we are heading back to tax season – see you after April 18!

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