COURSE SCHEDULE Day One: Financial Planning

Transcription

1 What the Lawyer, CPA and Financial Advisor Need to Know About Sophisticated Planning and Drafting for IRA & Qualified Plan Distributions Including How to Plan with a $5,000,000 Exemption COURSE SCHEDULE Day One: Financial Planning 7:30-8:00am Continental fast Reception 8:00-8:20am Introduction to retirement distribution planning. How can an attorney CPA or financial advisor add value to his/her clients by understanding retirement distribution planning? During this two day seminar, using both lecture and case studies, a systematic approach will be used identify the basic issues of retirement distribution planning, funding trusts with IRAs and estate administration for IRAs. As part of this seminar, there will be discussions on when it is appropriate and inappropriate to use trusts and how to compare and contrast different planning strategies. 8:20-9:00am 9:00-10:00am 10:00-10:20am Assessing the primary issues. This portion of the seminar will focus on the following issues: When should a client do a Roth conversion? Does the client have adequate liquidity to pay the estate tax? Who should be the beneficiary of the IRA? How to utilize disclaimer plans. When to have an IRA payable to a trust. Understanding the advantages and disadvantages of taking stock from a qualified plan. When to have an IRA payable to a charitable remainder trust. How to design life insurance trusts to compliment a large IRA. The advantages and disadvantages of the inherited IRA. Post mortem planning, including the September 30 th deadline. Overview of the key non-tax estate and financial planning issues. It is critical for estate planners to understand both tax and non-tax issues associated with IRAs. In the estate planning process one must recognize that IRAs pass outside of the probate system by separate beneficiary designation forms. Beneficiary forms can vary greatly from brokerage firm to brokerage firm. It is important for the estate planner to understand the various issues within these beneficiary forms. Furthermore, under IRC 408 and state community property law, a myriad of property law issues exist. The estate planning professional must understand how ERISA and REA affect qualified plans and bankruptcy. In this section we will also provide an overview of the disclaimer rules, discuss the need for trusts for beneficiaries from a property law perspective and the foundation to discuss planning for second marriages.

2 10:20-10:30am 10:30-11:05am 11:05-11:45am 11:45-noon Noon-1:00pm 1:00-2:20pm IRA and 401(k) Contributions. During this brief session we will discuss the contribution limitations for the years 2007 through 2009 along with the AGI limitations. Furthermore, we will discuss how the 6 percent excess accumulations tax is assessed and how to plan around it. Retirement Rollover Strategies. Retirees are faced with the difficult decision of whether or not to roll over their qualified retirement plans (e.g. 401(k)) to an IRA. Investment options, management fees and distribution options are often the key deciding factors that drive a retiree to opt for a rollover to an IRA. However, many retirees and their advisors overlook the income tax aspects associated with these transfers. If not handled properly, an ineffective IRA rollover can be disastrous from an economic and tax standpoint. In this session, we will look at the various rollover options (i.e. rollovers vs. trustee-to-trustee transfers) and how the 60-day rule comes into play. Also, we will discuss how one can apply for 60-day rollover relief when a "blown" rollover occurs. Further, we will conclude with a discussion of how IRAs provide more flexibility for postmortem distributions. Early distributions from IRAs and qualified plans. In this portion of the seminar there will be an overview of the 10 percent additional income tax on early distributions from qualified plans and IRAs. In counseling individuals younger than 59½, it is important for the attorney or CPA to understand this additional income tax and the various exceptions of how to avoid it. Further, under Revenue Ruling , substantial traps exist when structuring IRA distributions before age 59½. Without an overview of these technical areas, it would be very easy for an attorney or CPA providing tax advice, such as dividing IRAs into multiple IRAs, to inadvertently subject their clients to the 10 percent additional income tax. In this section there will be a discussion on the exceptions to the 10 percent additional income tax. During this section, particular attention will be paid to traps in the estate administration process, such as the spousal rollover trap. Lastly, an overview of the Substantially Equal Periodic Payment (SEPP) rules will be discussed, including the minimum distribution method, the amortization method and the annuity method. Q & A Lunch Roth IRAs. The Roth IRA provides significant estate and income tax benefits for clients. As such, in this section there will be discussion on how the income tax and estate tax rules relate to Roth IRAs and how to convert a traditional IRA to a Roth IRA. Also, time will be spent on discussing the recharacterization rules and how to obtain 9100 relief when recharacterization deadlines are missed. In particular, special attention will be paid to the Seven Reasons to Convert to a Roth IRA." For those attorneys or CPAs who are quantitatively inclined, this section

3 will add a new dimension his/her practice. For those attorneys or CPAs who simply want to be armed with additional knowledge in this area, this section clearly explains how the Roth IRA integrates into an effective estate plan. As part of this session, the attorney or CPA will understand the difference between qualified and non-qualified distributions, the basis rules and when Roth distributions are subject to the 10 percent additional income tax on early distributions. In addition, this section will cover the $100,000 AGI limitation on Roth IRA conversions and effective tax planning strategies to reduce a client s income below the $100,000 AGI threshold. Furthermore, in this section there will be a discussion on strategic and tactical strategies, such as the Roth Segregation Conversion Strategy, that will help the attorney or CPA maximize the benefits of a Roth IRA conversion. 2:20-2:35pm 2:35-2:45pm 2:45-3:05pm 3:05-3:45pm 3:45-4:45pm 4:45-5:00pm 5:00-5:30pm Prohibited Transactions and Unrelated Business Taxable Income (UBTI). The tax law governing IRAs is rife with harsh rules that prohibit a vast array of transactions between the IRA owner and the IRA. During this section, we will discuss how certain prohibited transactions and UBTI will cause an IRA to lose its tax-deferred status and possibly become subject to a 100% penalty. Q & A Tax planning when the plan has employer securities. An area of considerable opportunity (or liability) for attorneys, CPAs and their clients, this section focuses on tax planning opportunities when a qualified plan has employer securities. As part of the discussion, the income tax, estate tax and excise tax issues associated with Net Unrealized Appreciation (NUA) will be addressed. Substantial advantages exist when a retiree has employer stock in his/her qualified plan. Provided a client can meet the requirements of IRC 402(d)(4)(D), he/she will be able to convert ordinary income into capital gains, thus saving considerable taxes. In this portion of the course there will also be discussions on hedging stock taken from a qualified plan and how to use a Charitable Remainder Trust (CRT) to diversify stock taken from a qualified plan. Inherited IRA Analysis. Part of understanding the power of IRAs and other qualified plans is first to grasp the concept of tax-deferral. The best way to understand this concept is through mathematical modeling. In this section, we will run several case studies using the Inherited IRA Analyzer to demonstrate the economic benefit of deferring tax over a longer period of time. We will also provide an overview of Roth Conversion and NUA strategies. Q&A Overview of Homework Assignments

4 What the Lawyer, CPA and Financial Advisor Need to Know About Sophisticated Planning and Drafting for IRA & Qualified Plan Distributions Including How to Plan with a $5,000,000 Exemption 7:00-7:30am 7:30-8:15am 8:15-9:10am 9:10-9:30am 9:30-9:45am COURSE SCHEDULE Day Two: Estate Planning Continental fast Reception Estate tax issues. In this section there will be a review of the estate/gift, generation-skipping transfer tax, income tax and property law regarding disclaimers and marital deduction planning. Furthermore, a broad overview of unified credit issues, such as paying an IRA directly to children or to a trust for the benefit of spouse and children, will be discussed. In this section there will also be a review of the special marital deduction issues associated with IRAs, including the unlimited transfer between spouses qualifying for QTIP treatment and Revenue Ruling Stretch-Out IRAs. During this session, significant time will be spent on the quantitative advantages of the Inherited IRA. In particular, the attorney or CPA will learn how financial advisors should be utilizing life insurance to protect large IRAs in order to facilitate the stretch-out. During this session there will also be a discussion on spousal rollovers, including the spousal rollover trap. Because the federal estate tax is due nine months after a decedent's death, it will be important to understand how to avoid the tax spiral that occurs if the IRA is tapped to pay the estate tax. A specific nine-step process will be discussed on how to implement the Inherited IRA and how to present these issues to clients. In addition, there will also be a discussion on how to integrate the Inherited IRA with an Irrevocable Life Insurance Trust (ILIT). Lastly, there will be a discussion on Income in Respect to a Decedent (IRD) and the income tax deduction, allowed under IRC 691(c) resulting from the federal estate tax paid on IRD. Use of Life Insurance and ILITs to Maximize the Stretch-Out IRA. A major challenge for many clients is finding a tax-efficient way to pay the estate taxes attributable to an IRA. During this session, we will discuss using lifetime IRA distributions to purchase life insurance policies within an ILIT so as to maximize tax-deferral. Also, we will discuss which types of life insurance policies are most appropriate in this circumstance and how to design the ILIT so that the greatest amount of wealth passes to future generations. Further, discuss the drafting of tax apportionment clauses so as to avoid triggering a "deemed" IRA distribution. 9:45-11:15am Understanding the Final 401(a)(9) Regulations. This section will start with a thorough analysis of the minimum distribution rules, including the life expectancy rule, the five-year rule and required beginning date

5 issues. In particular, we will discuss inter vivos and post-mortem distributions from IRAs and changing the designated beneficiary after a person's death. Considerable attention will be paid to the ability to correct bad beneficiary designation forms during the "shakeout" period and how to obtain court reformations of trusts and beneficiary designations that have been poorly prepared. As part of this session the attorney or CPA will be given a thorough explanation of what happens if a client dies before and after age 70½, with or without a designated beneficiary. In addition, there will also be a discussion on what happens to an IRA that is payable to a charity, to a non-designated beneficiary trust or to the decedent's estate. Lastly, there will be an in-depth discussion on the latest separate share rulings. 11:15-11:45am Charitable planning with IRAs. Most planners agree that the ideal asset to leave to a charity is an IRA, but how? In this session there will be a discussion on Charitable Remainder Trusts (CRTs), private foundations, the CARE bill and integrating philanthropy with IRAs. In particular, considerable attention will be spent with the tier rules and the advantages of converting ordinary income to capital gains. 11:45am-12:35pm Lunch 12:35-2:00pm 2:00-2:15pm Paying IRAs to trusts. The primary focus of this section will be on paying IRAs to bypass and marital deduction trusts. It is important to understand that, beginning in 2004, each spouse will have a $1.5 million exemption from the estate tax, but one spouse may not have $1.5 million in property. Specifically, there will be a discussion on how to balance estates, integrate charitable deduction planning, prepare beneficiary designation forms (including forms with disclaimer provisions), the importance of naming a contingent beneficiary, survivorship, and separate share provisions. Particular attention will be paid to obtaining custodial approval and to reviewing IRA or qualified plan documents. Furthermore, there will be a detailed discussion on the three beneficiary form drafting methods and how to use disclaimers with unified credit planning.

6 2:15-3:30pm 3:30pm 3:30-5:00pm IRA trust drafting. In this section, there will be a comprehensive discussion of the income tax issues associated with naming a trust as a beneficiary of an IRA. As part of this section, the differences between conduit and accumulation trusts and which type of trust to draft for your client will be discussed. In particular, the requirements under the Final 401(a)(9) Regulations for a trust to be a "designated beneficiary trust", (including the hidden rules that are only available through careful reading of the last 10 years of private letter ruling requests) will be discussed at length. This section will conclude with an extensive discussion on the proper drafting language needed in order for trusts to qualify as a designated beneficiary trust." Seminar Adjourns Optional Q & A Mr. Keebler will be available.