Presenting a live 90-minute webinar with interactive Q&A PLEASE PRINT THESE MATERIALS. THE SPEAKER WILL BE REFERENCING THIS DOCUMENT DURING THE PROGRAM Trust Dispositions of IRAs and Qualified Plans: Structuring See-Through Trusts and Stretch Provisions WEDNESDAY, OCTOBER 3, 2018 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Salvatore J. LaMendola, Member, Giarmarco Mullins & Horton, Troy, Mich. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1. NOTE: If you are seeking CPE credit, you must listen via your computer phone listening is no longer permitted.
SAMPLE PROVISIONS FOR RETIREMENT PLAN TRUSTS Presented by: SALVATORE J. LAMENDOLA Giarmarco, Mullins & Horton, P.C. 101 W. Big Beaver Road, 10 th Floor Troy, MI 48084 (248) 457-7000 sjl@disinherit-irs.com www.disinherit-irs.com These materials are intended to provide a guide to the practitioner in drafting trusts that are intended to receive retirement plan benefits. Every effort has been made to assure accuracy and completeness. Nevertheless, neither the author nor the author s firm will assume responsibility for the use these materials in any particular case. Any attorney using these materials must independently verify their accuracy and completeness and satisfy himself or herself as to the federal and state tax consequences that will occur.
Salvatore J. LaMendola Giarmarco, Mullins & Horton, P.C. Troy, Michigan Salvatore J. LaMendola has been a member of the Trusts and Estates Practice Group at Giarmarco, Mullins and Horton, P.C. since 1996, and a member of the LL.M. adjunct law faculty at Western Michigan University Cooley Law School since 2016. He focuses his practice on basic estate planning, charitable planning, planning for retirement plan benefits, and amending irrevocable trusts via trust decanting. Sal advises clients on probate avoidance techniques and estate tax reduction strategies; on the federal income and transfer tax benefits of charitable remainder trusts, charitable lead trusts, and private foundations; on using trusts with IRAs and other retirement plans to ensure the best income tax and asset protection outcomes; and on transferring assets from old irrevocable trusts to new ones that contain the provisions now desired. Sal has been published in CCH Financial and Estate Planning; the Michigan Probate and Estate Planning Journal, and the Michigan Bar Journal. He has also authored the book entitled Estate Planning for Catholics: A Guide to Doing God s Will in Your Will (and Other Estate Planning Documents).
I. Conduit Trust A. Each year, beginning with the year of the Grantor's death, the Trustee of such trust shall withdraw from any such Retirement Plan the Minimum Required Distribution for such Retirement Plan payable to such trust for such year, plus such additional amount or amounts as the Trustee (excluding, however, any Interested Trustee) deems advisable in the Trustee's sole discretion. All amounts so withdrawn (net of expenses) shall be distributed to the Beneficiary (as defined below in this paragraph) free of trust, if the Beneficiary is then living. If the Beneficiary is not then living, the Trustee shall instead distribute the amount which would have been distributed to the Beneficiary had the Beneficiary been then living, in the manner provided for the distribution of the principal of such trust upon the death of the Beneficiary. Source: Jonathan G. Blattmachr, Pioneer Wealth Partners, LLC, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 B. Plan Benefits Trusts. To the extent that the Trustee is designated as the beneficiary of any qualified benefit plan or individual retirement account or other Nonprobate Asset subject to the Minimum Required Distribution Rules (the "MRD Rules") (collectively "Plan Benefits"), the following provisions apply: (i) a Plan Benefits Trust corresponding to each trust provided for in this instrument is created; (ii) all Plan Benefits shall be allocated (A) in accordance with the directions, if any, contained in the beneficiary designation or other instrument of transfer; otherwise, (B) [subject to Section (allocating all income in respect of a decedent to the Marital Deduction Amount), ]to or among the trusts or individuals receiving my Remaining Property, substituting Plan Benefits Trusts for their corresponding trusts; (iii) each Plan Benefits Trust shall be irrevocable; (iv) each Plan Benefits Trust shall be identical to its corresponding trust except with regard to required distributions outlined below, and (v) the Trustee shall deliver a copy of this instrument or alternate descriptive information to the plan administrator in the form and content and within the time limits required by applicable statute and treasury regulations. For purposes of this Section, each year following my death, the Trustee of the Plan Benefits Trust shall withdraw from the Plan Benefits held by or payable to that trust an amount not less than the minimum amount required to be distributed pursuant to Code Section 401(a)(9) as applicable to those Plan Benefits (the "Minimum Required Distribution Amount"). If the Current Beneficiary is serving as Trustee, any determination by the Trustee to withdraw more than the Minimum Required Distribution Amount in any year shall be treated as a discretionary distribution as described in Section [Cross reference to Section "Restrictions on Beneficially Interested Trustee]. The Trustee shall distribute all amounts withdrawn (the "Withdrawn Amount") as follows: (i) the Withdrawn Amount shall be paid directly upon receipt to the Current Beneficiary of such trust; (ii) the Current Beneficiary shall be the sole beneficiary of the Withdrawn Amount; and (iii) no Withdrawn Amount shall be accumulated in the trust during the Current Beneficiary's lifetime for the benefit of any Page 1
other beneficiary. In the case of any Descendant's Trust or Contingent Trust, the term "Current Beneficiary" means the child, other descendant or other beneficiary for whom the trust is named. In the case of the Marital Trust or the Bypass Trust, the term "Current Beneficiary" means the Surviving Spouse. I intend that the Plan Benefits Trust qualify as a conduit trust described in Treasury Regulation Section 1.409(a)(9)-5, A-7(c)(3), Example 2, and that except for persons whose interests are contingent solely upon the death of a prior beneficiary, only individuals eligible as designated beneficiaries (as defined in Code Section 401(a)(9) and applicable treasury regulations) for purposes of the MRD Rules shall ever be permissible distributees or appointees of Plan Benefits Trusts. This instrument shall be administered and interpreted in a manner consistent with this intent. Any provision of this instrument which conflicts with this intent shall be deemed ambiguous and shall be construed, amplified, reconciled, or ignored as needed to achieve this intent. The Trustee may amend the Plan Benefits Trust in any manner necessary for the sole purpose of ensuring that the trust qualifies and continues to qualify as a conduit trust described in Treasury Regulation Section 1.409(a)(9)-5, A- 7(c)(3), Example 2. Each amendment must be in writing and must be filed among the trust records. Source: Mickey R. Davis, Davis & Willms, PLLC, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 C. From and after my death, this trust shall be held for the benefit of [NAME OF INDIVIDUAL TRUST BENEFICIARY] (hereinafter referred to as the Beneficiary ). Each year, beginning with the year of my death, my trustees shall withdraw from any Deferrable Retirement Benefit the Required Minimum Distribution for such Deferrable Retirement Benefit for such year, plus such additional amount or amounts as the trustee deems advisable in its discretion. All amounts so withdrawn (net of expenses properly charged thereto) shall be distributed to the Beneficiary, if the Beneficiary is then living. Upon the death of the Beneficiary (or upon my death if the Beneficiary does not survive me) all remaining property of this trust [here insert the provisions that will apply after the conduit beneficiary s death; since the see-through trust rules do not care what these provisions say, they can be anything you want. Examples: shall be paid to [NAME OF REMAINDER BENEFICIARY], or shall be held in further trust pursuant to the provisions of Article [NUMBER] of this trust instrument. ]. Source: Natalie Choate, Nutter, McClennen & Fish LLP, Life and Death Planning for Retirement Benefits, Eighth Edition (Digital Version: https://retirementbenefitsplanning.net/) D. Benefit Plans. If the trust is the beneficiary of any Benefit Plan subject to Code section 401(a)(9) or comparable provisions (the Minimum Distribution Rules ), the trustee shall withdraw from the Life Trust s portion of the Benefit Plan the amount required under the Minimum Distribution Rules and may make additional withdrawals for the Page 2
purposes set forth in subsection (a). If and to the extent necessary to enable the Benefit Plan to use the beneficiary s life expectancy for purposes of applying the Minimum Distribution Rules without considering the identity or life expectancy of any other beneficiary (whether current or future, vested or contingent) of the trust, the trustee shall distribute to the beneficiary each withdrawal from a Benefit Plan, whether or not such withdrawal is required under the Minimum Distribution Rules. Source: Steven B. Gorin, Thompson Coburn LLP, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 Page 3
II. Spray Conduit Trust A. From and after my death, the trustee shall hold and administer all amounts then held by the trust, or that become payable to this trust as a result of my death, for the benefit of my children surviving me, upon the following terms. A. While there is any child of mine living who is under the age of [AGE, such as thirty ] years, the trustee shall hold, administer, and distribute Deferrable Retirement Benefits as provided in Paragraph B and shall hold, administer, and distribute all other property of the trust as provided in Paragraph C. B. Each year, beginning with the year of my death, the trustee shall withdraw from any Deferrable Retirement Benefit the Required Minimum Distribution for such Deferrable Retirement Benefit for such year, plus such additional amount or amounts (if any) as the trustee deems advisable in its discretion. The trustee shall forthwith pay all amounts so withdrawn (net of expenses properly charged thereto) to such one or more of my children as are then living, and in such proportions among them, as the trustee deems advisable in its discretion. C. The trustee shall pay such amounts of the income and/or principal of property subject to this paragraph to (or apply it for the benefit of) such one or more of my children as are then living, and in such proportions among them as the trustee deems advisable in its discretion. D. At such time as there is no child of mine living who is under the age of [AGE, such as thirty ] years, the trust shall terminate and be distributed outright and free of trust to my issue then living by right of representation, or, if there are no such issue then living, shall be distributed to [NAME OF DEFAULT REMAINDER BENEFICIARY]. Source: Natalie Choate, Nutter, McClennen & Fish LLP, Life and Death Planning for Retirement Benefits, Eighth Edition (Digital Version: https://retirementbenefitsplanning.net/) B. Distribution from Benefit Plans. This subsection applies if the Life Trust is the beneficiary of any Benefit Plan subject to Code section 401(a)(9) or comparable provisions (the Minimum Distribution Rules ). If and to the extent necessary to enable the Benefit Plan to use the beneficiary s life expectancy for purposes of applying the Minimum Distribution Rules without considering the identity or life expectancy of any other beneficiary (whether current or future, vested or contingent) of the trust, the trustee shall distribute each withdrawal from a Benefit Plan to the individual(s) to or for whom that withdrawal is being made, whether or not such withdrawal is required under the Minimum Distribution Rules. The trustee shall withdraw from the Life Trust s portion of the Benefit Plan the amount required under the Minimum Distribution Rules, and such amounts withdrawn shall be distributed in the following priority: (1) for the purposes as described in subsection (a) [distributions for the primary beneficiary]; then Page 4
(2) for the purposes as described in subsection (b) [distributions for the primary beneficiary s descendants]; then (3) to the beneficiary, but if and to the extent that the second sentence of this subsection does not require distributions to be made to one or more individuals, such amount may be accumulated in the Life Trust. The trustee may withdraw such additional amounts from the Benefit Plan as the trustee shall deem appropriate for the purposes described in subsections (a) and (b), and shall distribute such additional amounts so withdrawn for such purposes. Source: Steven B. Gorin, Thompson Coburn LLP, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 Page 5
III. Outright to Next Level Beneficiaries A. Following my death, the trustee shall pay to or apply for the benefit of my spouse, as long as my spouse is living, all income of the trust and such amounts of the principal as the trustee deems advisable in its discretion for my spouse s health and support in the standard of living to which my spouse had become accustomed during my life. Upon my spouse s death (or upon my death, if my spouse does not survive me), the trust shall terminate, and all property of the trust shall be distributed, outright and free of trust, to my issue then living by right of representation. Source: Natalie Choate, Nutter, McClennen & Fish LLP, Life and Death Planning for Retirement Benefits, Eighth Edition (Digital Version: https://retirementbenefitsplanning.net/) Page 6
IV. Age Restriction A. Each year, beginning with the year of the Grantor's death, the Trustee of such trust shall withdraw from any such Retirement Plan the Minimum Required Distribution for such Retirement Plan payable to such trust for such year, plus such additional amount or amounts as the Trustee deems advisable in its sole discretion. All amounts so withdrawn or which are otherwise paid or payable to the Trustee of that Descendant s Separate Trust, along with all income with respect thereto and all changes, increases and decreases thereof (collectively the "Descendant s Separate Trust Designated Beneficiary Portion"), shall be accounted for by Trustee, and shall be subject to the distribution and other provisions with respect to that Descendant s Separate Trust, both during the Descendant s Separate Trust Measuring Life's lifetime and at the Descendant s Separate Trust Measuring Life s death, provided that, notwithstanding anything to the contrary, none of such Descendant s Separate Trust Designated Beneficiary Portion shall ever be distributed, whether pursuant to the terms of that Descendant's Separate Trust, the terms of any trust to which property of that Descendant's Separate Trust passes following the death of any descendant of the Grantor, the exercise of any power of appointment, or any other provision (whether under this Trust Agreement or under applicable law of intestacy or otherwise), to anyone other than an individual who was born at the same time or after the Descendant s Separate Trust Measuring Life. The intent of these provisions is to cause the Descendant s Separate Trust Measuring Life to be treated as the designated beneficiary of such Retirement Plan for purposes of Code Sec. 401(a)(9) and the Regulations thereunder, so that the amount in such Retirement Plan may be paid over the life expectancy of the Descendant s Separate Trust Measuring Life, rather than being subject to the default payout rule under Code Sec. 401(a)(9)(B)(iii). Source: Jonathan G. Blattmachr, Pioneer Wealth Partners, LLC, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 B. Plan Benefits Trusts. To the extent that the Trustee is designated as the beneficiary of any qualified benefit plan or individual retirement account or other Nonprobate Asset subject to the Minimum Required Distribution Rules (the "MRD Rules") (collectively "Plan Benefits"), the following provisions apply: (i) a Plan Benefits Trust corresponding to each trust provided for in this instrument is created; (ii) all Plan Benefits shall be allocated (A) in accordance with the directions, if any, contained in the beneficiary designation or other instrument of transfer; otherwise, (B) if there is a surviving spouse, [subject to Section (allocating all income in respect of a decedent to the Marital Deduction Amount), ] to or among the trusts or individuals receiving the Deceased Spouse's Remaining Property; otherwise, (C) Plan Benefits received with respect to the death of the Deceased Spouse shall be allocated to or among the trusts or individuals receiving the Deceased Spouse's Remaining Trust Property and Plan Benefits, substituting in each case Plan Benefits Trusts for their corresponding trusts; (iii) each Page 7
Plan Benefits Trust shall be irrevocable; (iv) each Plan Benefits Trust shall be identical to its corresponding trust except that all of the following persons, if any, who would otherwise be beneficially interested in the trust (other than those whose interests are contingent solely upon the death of a prior beneficiary), are completely excluded as beneficiaries and permissible appointees of the trust: (A) individuals having a shorter life expectancy than the measuring beneficiary and (B) entities not having a life expectancy; and (v) the Trustee shall deliver a copy of this instrument or alternate descriptive information to the plan administrator in the form and content and within the time limits required by applicable statute and treasury regulations. For purposes of this Section, the "measuring beneficiary" of a Plan Benefits Trust means (1) the oldest individual who is both living and ascertainably specified in this instrument (by name or by class) as a current permissible beneficiary of the trust as of the date for determination of the "Designated Beneficiary" under applicable statute and treasury regulations; or, if older, (2) our oldest then living descendant, if any. We intend that, except for persons whose interests are contingent solely upon the death of a prior beneficiary, only individuals eligible as designated beneficiaries (as defined in Code Section 401(a)(9) and applicable treasury regulations) for purposes of the MRD Rules shall ever be permissible distributees or appointees of Plan Benefits Trusts. This instrument shall be administered and interpreted in a manner consistent with this intent. Any provision of this instrument which conflicts with this intent shall be deemed ambiguous and shall be construed, amplified, reconciled, or ignored as needed to achieve this intent Source: Mickey R. Davis, Davis & Willms, PLLC, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 C. Notwithstanding anything herein to the contrary, if one or more of my spouse and my descendants survive me and any retirement plan benefits are payable to this trust, then (i) the trustee shall make no distribution or payment of any retirement plan benefits to a Disqualified Person (defined in the following sentence), and (ii) no power of appointment granted by me hereunder with respect to retirement plan benefits may be exercised in favor of a Disqualified Person, and, if necessary, the class of objects of any such power of appointment with respect to such benefits shall be narrowed to the largest class consistent with the terms of the power of appointment and the foregoing limitation. Disqualified Person means (1) any individual born in the calendar year prior to the calendar year of birth of (a) my spouse, if my spouse survives me, or, if my spouse does not survive me, (b) my oldest living descendant at the time of my death, (2) any recipient other than a noncharitable trust or an individual, or (3) any trust that may have as a beneficiary, with respect to retirement plan benefits, anyone described in (1) or (2) above that is not subject to the restrictions of this paragraph. Source: Iowa Trust Association Will and Trust Form Book by Schiff Hardin LLP Page 8
V. Last One Standing A. From and after my death, the trustee shall hold and administer all amounts then held by the trust, or that become payable to this trust as a result of my death, for the benefit of my children surviving me, upon the following terms. While there is any child of mine living who is under the age of [AGE, such as thirty ] years, the trustee shall pay such amounts of the income and/or principal of the trust to (or apply it for the benefit of) such one or more individuals as the trustee shall select from the class consisting of all my issue then living, and in such proportions among them as the trustee deems advisable in its discretion for their care, support, education, comfort, and welfare. The trust shall terminate at the earlier of the following times: A. Such time as there is no child of mine living who is under the age specified above. B. Such time as there is only one child of mine living (regardless of such child s age). Upon termination, the trust property shall be distributed, outright and free of trusts, to my issue then living, by right of representation. Source: Natalie Choate, Nutter, McClennen & Fish LLP, Life and Death Planning for Retirement Benefits, Eighth Edition (Digital Version: https://retirementbenefitsplanning.net/) Page 9
VI. Marital Trust A. I intend that the Marital Trust qualify for the federal estate tax marital deduction and be administered as a qualified terminable interest property trust under Internal Revenue Code Section 2056(b)(7). Consistent with this intent, the Trustee shall administer the Marital Trust as follows: 1. Income. The Trustee shall pay all of the trust net income to my spouse, at least quarterly, during the lifetime of my spouse. If the Marital Trust is the beneficiary of any Retirement Plan (as defined below), which I anticipate, the Trustee shall comply with the following: (a) The Trustee shall elect to receive distributions from a Retirement Plan payable to the Marital Trust in a manner that complies with the Minimum Distribution Rules, if applicable, and also so that at least the required minimum distribution from the Retirement Plan each calendar year is distributed to the Marital Trust and allocated to the trust income during the year. If distributions from the Retirement Plan total less than all income earned by the Retirement Plan for a calendar year, my spouse shall have the power to compel the Trustee to demand additional distributions from the Retirement Plan equal to the shortfall so that my spouse can receive an amount equal to all income earned by the Retirement Plan during that year. When determining the income of the Retirement Plan, the Trustee shall not apply MCL 555.809(3) or any similar legislation. The Trustee shall allocate any such amount to income. My spouse shall have full power, in my spouse s discretion, to compel the Trustee to demand such distributions and to compel the Retirement Plan Trustee to convert any nonproductive property to productive property. (b) In calculating all income earned by the Retirement Plan, the Trustee shall allocate all Retirement Plan expenses, including income taxes and Trustee s fees, to principal so that income distributions from the Retirement Plan are not reduced. (c) I intend that the Marital Trust and the property comprising it, including all distributions from Retirement Plans, be eligible for the federal estate tax marital deduction, without imposing any requirement that this deduction be claimed. The Trustee shall exercise all powers and authority consistent with this intent. In addition, all powers granted to my spouse in this Marital Trust shall be exercisable by a fiduciary on my spouse s behalf if my spouse is incapacitated at any time. Source: Comerica Form Book 2017 Page 10
B. Despite any other provisions of this instrument to the contrary, the trustee shall allocate to income from distributions to the Marital Trust in any calendar year from any individual retirement account an amount equal to the income earned by the individual retirement account in such year. If the distributions from the individual retirement account in any year to the Marital Trust shall be less than the amount of income earned by the individual retirement account in such year, my spouse shall have the right to require the trustee to withdraw from the individual retirement account and distribute to my spouse as income from the Marital Trust an additional amount so that my spouse can be paid an amount equal to such income. If at any time, the Internal Revenue Service shall determine that all income earned in the individual retirement account in a given year does not have to be distributed to my spouse in order for the Marital Trust to be eligible for the federal estate tax marital deduction, only such amount required for such qualification shall be distributed to my spouse or subject to my spouse s right of withdrawal. Source: Iowa Trust Association Will and Trust Form Book by Schiff Hardin LLP C. Notwithstanding any other provision of this instrument, the trustee of the Marital Trust (i) shall make any unproductive property productive, or shall convert it into productive property, within a reasonable time following a written direction from my spouse, (ii) shall not commingle of investment purposes the trust property with the property of any other trust held hereunder, and (iii) shall allocate to income from distributions received by the Marital Trust in any calendar year from any retirement plan an amount equal to the income earned by the portion of the retirement plan payable to the Marital Trust in such year. My spouse shall have the power, in any calendar year, to compel the trustee to withdraw from the retirement plan an amount equal to the income earned by that portion of the retirement plan in such year. Source: Iowa Trust Association Will and Trust Form Book by Schiff Hardin LLP D. From and after my death, this trust shall be held for the benefit of my spouse [NAME OF SPOUSE] (hereinafter referred to as my spouse ), if my spouse survives me. Each year, beginning with the year of my death, and so long as my spouse is living, the trustee shall withdraw from any Retirement Benefit the income of such Benefit, or (in the case of any Deferrable Retirement Benefit) the Required Minimum Distribution for such Deferrable Retirement Benefit for such year if greater than the income of such Deferrable Retirement Benefit, plus such additional amount or amounts as the trustee deems advisable in its discretion. All amounts so withdrawn (net of expenses properly charged thereto) shall be paid directly to my spouse upon receipt by the trustee. Upon my spouse s death (or upon my death if my spouse does not survive me) all remaining property of this trust [here insert the provisions that will apply after the conduit beneficiary s death; since the see-through trust rules do not care what these provisions Page 11
say, they can be anything you want. Examples: shall be paid to [NAME OF REMAINDER BENEFICIARY], or shall be held in further trust pursuant to the provisions of Article [NUMBER] of this trust instrument. ]. Source: Natalie Choate, Nutter, McClennen & Fish LLP, Life and Death Planning for Retirement Benefits, Eighth Edition (Digital Version: https://retirementbenefitsplanning.net/) Page 12
VII. Prohibit Payment of Estate Expenses, Etc. A. Notwithstanding any other provision herein, the Trustee may not, on or after September 30 of the calendar year following the calendar year in which my death occurs, or such earlier date as may be established by the Minimum Distribution Rules as the final date for determining whether this trust meets the requirements for treatment of the trust s beneficiaries as if they had been named directly as beneficiary of any Retirement Benefit payable to this trust for purposes of the Minimum Distribution Rules (the Designation Date ), distribute to or for the benefit of my estate, any charity or any other nonindividual beneficiary any Retirement Benefit (as defined herein) payable to this trust under any Retirement Benefits (as defined herein). It is my intent that all such Retirement Benefits held by or payable to this trust on or after the Designation Date be distributed to or held for only individual beneficiaries, within the meaning of the Minimum Distribution Rules. Accordingly, I direct that such Retirement Benefits may not be used or applied on or after the Designation Date for payment of my debts, taxes, expenses of administration or other claims against my estate; nor for payment of estate, inheritance or similar transfer taxes due on account of my death. This paragraph shall not apply to any bequest or expense that is specifically directed to be funded with the Retirement Benefits by other provisions of this instrument, if any. The Minimum Distribution Rules shall mean the rules of Internal Revenue Code Section 401(a)(9) and the applicable Treasury regulations. Source: Comerica Form Book 2017 B. If any benefits are payable to this trust under any qualified pension, profit-sharing, stock bonus, Keogh plan, or individual retirement account, as those terms are defined in the Code, or any other retirement arrangement, subject to the minimum distribution rules of Code Section 401(a)(9) or other comparable provisions of law (the retirement plan ), then it is my intent that the trust be deemed a designated beneficiary of such retirement plan, within the meaning of Code Section 401(a)(9), or other comparable provisions of law, and regulations thereunder. Therefore, if necessary to effectuate my intent, notwithstanding any other provision hereof, the trustee shall not distribute any retirement plan benefits to or for the benefit of my estate, any charitable organization, or any other non-individual beneficiary, and shall not use or apply such retirement plan benefits to pay my debts, taxes, expenses or administration, or other claims against my estate, or estate, inheritance, or similar transfer taxes due on account of my death. Source: Iowa Trust Association Will and Trust Form Book by Schiff Hardin LLP Page 13
VIII. Trust Decanting A. No trust to which Retirement Benefits are payable may be modified by the exercise of any trust decanting power granted in this trust instrument or granted by applicable state law. B. An exercise of the decanting power is subject to the following limitations: If the first trust is directly or indirectly the beneficiary of qualified benefits property, the second-trust instrument may not include or omit any term that, if included in or omitted from the first-trust instrument, would have increased the minimum distributions required with respect to the qualified benefits property under 26 U.S.C. Section 401(a)(9)[, as amended,] and any applicable regulations, or any similar requirements that refer to 26 U.S.C. Section 401(a)(9)[, as amended] or the regulations. If an attempted exercise of the decanting power violates the preceding sentence, the trustee is deemed to have held the qualified benefits property and any reinvested distributions of the property as a separate share from the date of the exercise of the power and Section 22 applies to the separate share. Qualified benefits property means property subject to the minimum distribution requirements of 26 U.S.C. Section 401(a)(9)[, as amended,], and any applicable regulations, or to any similar requirements that refer to 26 U.S.C. Section 401(a)(9) or the regulations. (a) If exercise of the decanting power would be effective under this [act] except that the second-trust instrument in part does not comply with this [act], the exercise of the power is effective and the following rules apply with respect to the principal of the second trust attributable to the exercise of the power: (1) A provision in the second-trust instrument which is not permitted under this [act] is void to the extent necessary to comply with this [act]. (2) A provision required by this [act] to be in the second-trust instrument which is not contained in the instrument is deemed to be included in the instrument to the extent necessary to comply with this [act]. (b) If a trustee or other fiduciary of a second trust determines that subsection (a) applies to a prior exercise of the decanting power, the fiduciary shall take corrective action consistent with the fiduciary s duties. Source: Uniform Trust Decanting Act, Section 19(b)(6), Section 19(b)(4) and Section 22(a) Page 14
IX. Trust Protector A. Notwithstanding any of the foregoing provisions of this Section, with respect to a trust created hereunder that holds an interest in a Stretch-Out Retirement Account as to which a Current Beneficiary is the Stretch- Out Retirement Beneficiary, diminishes such Current Beneficiary s interest in conduit distributions. Source: Steven E. Trytten, AFRCT, LLP, Yes, I ll Order that Trust Fully Loaded, Heckerling 2017 Page 15
X. Trustee Powers A. Make direct "trustee-to-trustee" or similar type transfers of assets contained in any Retirement Benefit, if permitted by the Retirement Plan. For example, the Trustee is authorized to arrange for the direct transfer of assets in an individual retirement account of which the Trustee is the beneficiary to another individual retirement account of which the Trustee will be the beneficiary. At any time when there is more than one trust created hereunder that is the beneficiary of a Retirement Benefit, separate accounts or shares shall be maintained for each such trust in proportion to the trust s interest, by initially determining the benefits that are owed to the trust at such time. From that time forward, each such account or share shall bear its own pro rata share of gains and losses and shall otherwise be accounted for separately. I intend that such separate accounts or shares shall be treated as separate accounts or shares within the meaning of Treasury Regulations Section 1.401(a)(9)-8, Q&A3. All distributions to a trust shall be charged to such trust s respective separate account or share. Source: Comerica Form Book 2017 B. Distributable net income of a trust hereunder under Internal Revenue Code Section 643(a) includes all required minimum distributions made to the trust. All distributions received by the Trustee from a Retirement Benefit payable to a trust hereunder during the oldest beneficiary s lifetime shall be allocated to the trust accounting income of such trust. Source: Comerica Form Book 2017 C. Distribute fully, notwithstanding other provisions of this trust, the interest of any beneficiary hereunder who is not an individual and therefore is not a qualified beneficiary within the meaning of Internal Revenue Code Section 401(a)(9) and the applicable Treasury Regulations, by September 30 of the year following the year of my death, if the Trustee determines, in the Trustee s sole discretion, that failure to do so would result in acceleration of distributions from any Retirement Benefits to the detriment of the beneficiaries or the objectives of this trust, or for any other reason. Source: Comerica Form Book 2017 Page 16
D. To elect to receive any retirement plan death proceeds, whether under a qualified pension, profit-sharing, stock bonus or Keogh plan, individual retirement account or any other retirement plan, either in lump sum or in any other manner permitted by the terms of the particular retirement plan. The trustee may make a qualified disclaimer of the benefits of any retirement plan payable to the trust, including individual retirement accounts. Such disclaimed benefits shall be payable in accordance with such plan. Source: Iowa Trust Association Will and Trust Form Book by Schiff Hardin LLP Page 17
XI. Other Ideas A. I direct the trustee to establish a private foundation, as defined in Code Section 509(a), either as a trust or corporation, and named the FAMILY CHARITABLE FOUNDATION (the Foundation ), as soon as possible after the division date and to transfer the sum of one thousand dollars to it. The trustee shall also distribute to the Foundation the proceeds of all qualified trusts (as defined in Code Section 401(a)) and individual retirement accounts (as defined in Code Section 408(a)), that are payable to the trustee as of the division date. The purpose of the Foundation shall be to make distributions of net income and principal of the Foundation for one or more charitable, educational, religious, scientific or literary purposes (within the meaning of those terms as used in Code Section 501(c)(3)), including the making of distributions to one or more charitable organizations, at such times and in such amounts or proportions as the trustees of the Foundation or the board of directors of the Foundation (the governing body ), as the case may be, shall determine. The trustee hereunder shall designate one or more individuals or entities (which may include the trustee and must include each of any child who is able and willing to act) as the initial governing body of the Foundation. It is my intention that the Foundation be exempt from federal and state income taxation and that a contribution to it be deductible for federal and state income, estate, inheritance and gift tax purposes to the extent permitted by the Code and other applicable legislation and regulations, and the trustee hereunder shall include whatever provisions are necessary in the governing documents of the Foundation to achieve this purpose. Notwithstanding the foregoing, if the Foundation does not receive federal taxexempt status within two years after the division date, or if no proceeds of any qualified trust or individual retirement account are payable to the trustee, the trustee shall instead distribute all such property to one or more charitable organizations, in such proportions and for such charitable purposes, as the trustee shall determine in its sole discretion. I request (but do not direct) that the governing body of the Foundation or the trustee, as the case may be, consider the organizations that my spouse and I supported during our lifetimes in determining the recipients of amounts to be distributed hereunder. After making provision for any allocations required under the preceding provisions of this paragraph, the trustee shall allocate the balance of the trust property among as many separate equal trusts as shall be necessary to establish one trust named for each child of mine who is either living on the division date or then deceased with one or more descendants then living. The term retirement plan means any qualified pension, profit-sharing, stock bonus, Keogh plan, or individual retirement account, as those terms are defined in the Code, or any other retirement arrangement, subject to the minimum distribution rules of Code Section 401(a)(9) and regulations thereunder. Page 18