living trust
i have an individual living trust drafted by an estate attorney in 2000 but i have problems understanding the contents. what part of the trust can i find the contents that my trust is a “see through” and “conduit” trust. thanks.
i have an individual living trust drafted by an estate attorney in 2000 but i have problems understanding the contents. what part of the trust can i find the contents that my trust is a “see through” and “conduit” trust. thanks.
Permalink Submitted by mk foss on Tue, 2009-08-04 16:58
Most trusts that I see will qualify as “see through” trusts.
There are 4 requirements:
1. Is the trust valid under state law?
2. Is the trust irrevocable or will it become irrevocable by its terms upn the death of the grantor/IRA owner/plan participant?
3. Are the beneficiaries identifiable?
4. Can the plan administrator/IRA custodian be furnished with a copy of the trust agreement or with a list of all trust beneficiaries including contingent beneficiaries by October 31 of the year after the owner/participant’s death?
You should be able to determine numbers 2 and 3 by reading the agreement. Number 4 can’t be determined yet and the attorney can advise you about number 1.
Permalink Submitted by Bruce Steiner on Tue, 2009-08-04 19:18
It’s unlikely you’d want to have a conduit trust. I don’t know why they’ve received so much attention. If the beneficiary lives to life expectancy, which will happen 50% of the time, nothing will be left in the trust at the beneficiary’s death. All of the assets which could have been kept out of the beneficiary’s estate, and been protected against potential creditors (including spouses), will be thrown into the beneficiary’s estate.
If PLR 200228025 is correct, it’s unlikely that a trust from 2000 will qualify for the stretchout. While a private letter ruling cannot be cited as precedent, the IRS caught many people by surprise in 2002 when they issued PLR 200228025, which took a very expansive definition of who is considered a beneficiary for purposes of determining the oldest beneficiary of a trust (by which the stretchout is measured).
For more on trusts as beneficiaries of retirement benefits, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.