Estate Planning Fundamentals for IRAs 2020

Learning Objectives

• To understand the new changes relating to IRAs and employer plans.
• To learn how to apply new estate and estate tax planning strategies in light of changes to IRA and employer plan rules
• To Develope a thorough understanding of the Deferral and Tax Rate arbitrage associated with a Charitable Remainder Trust.
• To recognize Income Tax Planning when IRAs are Paid to Trusts and how to Pass-Out Taxable Income to the Beneficiaries
• To recognize the new and extended income tax provisions enacted as part of this new legislation

Course Description

The SECURE ACT is the first major legislation to revamp retirement plans in over a decade. Every tax professional dealing with required minimum distributions, estate planning, and setting up retirement plans for small businesses, as well as those about to prepare tax returns needs to understand this new legislation and its implications. The SECURE Act could make a Roth IRA conversion strategy more appealing to individuals who plan on leaving a significant inheritance to heirs and want to limit the future tax liability on those assets.

Session 1 - The Mathematics of Estate Planning for IRAs After the Secure Act

The SECURE Act could affect everything from required minimum distributions (RMDs) to inheritances. Perhaps the most significant change for your clients is the elimination of the "stretch" IRA in favor of the "10-year rule." Effective January 1st, this change will decrease wealth transfer and require estate plan updates. To avoid a potential tax disaster, your clients who have a substantial qualified plan or IRA must reconsider beneficiary designations and trust provisions. 

Major Topics Covered in Session 1:

• Designated and Non-Designated Beneficiary Trusts.
• Conduit Trusts
• Five-year rule vs Ten-year rule or Life Expectancy Rule.
• Income and Estate Tax-free benefits of IRA relocation.
• Section 664 CRT tier rules
• Benefits of using the State Tax-Exempt IRA trust to reduce State Income Taxes
• Changes in Estate Planning Strategies for IRAs after Secure Act

Session 2 - Estate Planning for IRAs Payable to Trusts After the Secure Act

In this webinar we are not giving enough attention to the tax aspects of IRA planning and the opportunities to preserve retirement funds after death. Nevertheless, with a solid understanding of the post-Secure Act IRA provisions, one will be able to plan around the key issues and identify opportunities. The ten-year rule under 401(a)(9)(H) was layered over the existing statute and underlying 401(a)(9) regulations. Most IRAs will be subject to the ten-year rule, but traps and exceptions continue to exist in the expanded labyrinth of tax and property law surrounding IRA-Trusts.

Major Topics Covered in Session 2:

• The Ten-Year Payout Rule and the Five Statutory Exceptions under the Secure Act
• The Secure Act’s Conduit Trust Disaster and what the Drafting Attorney must know
• Understanding the four types of Trusts after the Secure Act; the Conduit Trust, the Designated Beneficiary Trust, the Non-Designated Beneficiary Trust and the Eligible Designated Beneficiary Trust
• Understanding the Ghost and Five-Year Trap
• Drafting Designated Beneficiary Accumulation Trusts for Non-Exception Beneficiaries
• When to use Non-Designated Beneficiary Accumulation Trust for Non-Exception Beneficiaries
• Payouts when a Beneficiary Dies
• What to do when an IRA is Payable to Non-Designated Beneficiary Trusts and the Five Year and Ghost Traps
• Understanding the Special Rules for Eligible Beneficiaries and Eligible Beneficiary Trusts
• Reviewing Beneficiary Designation Forms and Qualified Trusts
• Weaving Disclaimer Planning to Beneficiary Designation Forms and Trusts
• The Impact of ERISA, REA and Community Property
• Spousal Rollovers Outright and from Trusts
• How to use Stretch out Strategies still Available
• Using out of State Trusts to Reduce State Income Taxes

Session 3 - Tactical and Strategic Roth Conversions in 2020

Roth conversions have always had the potential to unlock hidden value. Today’s Market Conditions and the no RMD rule in 2020 are creating some unique opportunities. One emerging strategy is to trade your RMD amount for a Roth conversion. This appears to be a promising opportunity for many clients. Before Secure Act, it was perhaps simple nominal conversions to take advantage of a low-income year. However, the SECURE Act expands the impact of Roth conversions beyond a quantitative arbitrage game to a strategic estate planning set of issues that should be of interest to all lawyers, trust officers, insurance and financial advisors and CPAs. The paradigm shift from life expectancy distributions to a 10-year distribution is at its core a mathematical problem. Therefore, quantitative driven strategies can mitigate the impact of lost deferral and Roth conversions will be the primary tool for most families.

Major topics Covered in Session 3:

• Low value Roth conversions
• Taking advantage of 2020’s no RMD rule
• Roth conversions equal to the forgiven RMD
• Critical Roth conversion concepts after the SECURE Act
• Critical strategies by profession and objectives
• Roth conversions for rate arbitrage compared to traditional IRAs to trusts
• Over 10 reasons why clients should consider converting to a Roth IRA
• Taxation of Roth IRA conversions and distributions
• Easy to read conversion tables by common scenarios
• How to use and analyze Roth conversion software
• Mathematics of Roth IRA conversions
• Timing of Roth IRA conversions to gain tax rate arbitrage
• Estate tax considerations, including why a Roth conversion is much better when an estate tax exists
• The SECURE Act’s 10-year payout rule and the high tax rates to follow
• “Stretch” Roth IRAs for eligible designated beneficiaries
• How to utilize Roth IRAs for clients with special needs and asset protection concerns
• Utilizing Roth IRAs to fund long-term care strategies

Session 4 - Fundamentals of Income Taxation of Trusts & Form 1041 Planning

With more and more trusts being used today and audits of Form 1041 (U.S. Income Tax Return for Estates and Trusts) on the rise, it has never been more critical to understand the ins and outs of income taxation of trusts and estates and the preparation of the Fiduciary Income Tax Return. Recent shifts and changes in the taxation of estates and trusts have also changed some of the planning techniques that practitioners should consider when advising clients.

Major topics Covered in Session 4: 

• Grantor trusts
• Charitable Remainder Trusts (CRTs)
• Bracket Management
• Shifting Income with Trust Distributions
• Limit on Miscellaneous Itemized Deductions
• State Income Tax Planning for Trusts
• Form 1041 Example

This is not a course designed to help only wealthy clients. The information you receive in this course will be helpful to advise the mass-affluent and you will receive practical tools that you can actually use right in your practice!