Estate and Gift Tax Issues for Employee Benefit Plans discusses estate planning considerations relating to distributions from qualified retirement plans and individual retirement accounts (IRAs). The Portfolio includes a general discussion of qualified retirement plans, IRAs, and nonqualified deferred compensation plans. In addition, spousal rights, provided under the Retirement Equity Act of 1984, are discussed in detail. 

This Portfolio, written by Louis A. Mezzullo, Esq., of Luce, Forward, Hamilton & Scripps LLP, explores the gift, estate, and generation-skipping transfer tax issues that arise with respect to qualified retirement plan benefits and IRAs. It also discusses income tax considerations, including the income taxation of distributions, the special income tax treatment of employer securities received as part of a distribution, income in respect of a decedent, issues that arise when plan benefits and IRAs are paid to the beneficiaries of a deceased participant or account holder, and the ability to roll over distributions from qualified retirement plans into IRAs and other qualified retirement plans. This Portfolio also examines the various penalty taxes that may apply to a distribution from a qualified retirement plan or IRA, including the 10% additional income tax on premature distributions and the 50% excise tax on the amount of a minimum required distribution that is not made to a participant. 

In addition, this Portfolio covers in detail how to plan for the receipt of qualified retirement plan benefits and IRAs, including the naming of a beneficiary while the participant is still active, receiving distributions from a qualified retirement plan or IRA once the participant reaches his or her required beginning date, and identifying the various options available to the executor or beneficiary of a deceased participant or account holder's estate to reduce or defer taxes. The Portfolio concludes with a discussion of estate planning for nonqualified plan benefits. 

The Worksheets include tables to be used with the final regulations on required minimum distributions, an illustration of the unfavorable tax consequences that can occur when proper planning has not been done, sample language for beneficiary designations and trust agreements for trusts intended to be recipients of qualified retirement plan benefits and IRAs, and a workshop problem designed to answer the most frequently asked questions in this area.  

Estate and Gift Tax Issues for Employee Benefit Plans allows you to benefit from:

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area
• Invaluable practice documents including tables, charts and lists
• Plain-English guidance from world-class experts
• Real-world and in-depth analysis that lets you explore various options
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more
• Alternative approaches to both common and unique tax scenarios 

This Portfolio is part of the U.S. Income Portfolios Library, a comprehensive series that includes more than 200 Portfolios, which covers every federal tax topic with expert, in-depth analysis, and offer commentary on a wide range of federal taxation topics, including Compensation Planning, Deductions and Credits, Partnerships and Corporations, Special Pass-Through Entities, Corporate Reorganizations, Real Estate, Procedure and Administration, and more.

Detailed Analysis

I. Background

A. Qualified Retirement Plans and Individual Retirement Accounts (IRAs)

1. Advantages of Qualified Plans

2. Types of Qualified Plans

a. In General

b. Types of Defined Contribution Plans

(1) Profit-Sharing Plans

(2) Money Purchase Pension Plans

(3) Target Benefit Pension Plans

(4) Stock Bonus Plans

(5) Employee Stock Ownership Plans

(6) Section 401(k) Plans

c. Types of Defined Benefit Pension Plans

d. Other Categories

3. Requirements for Favorable Tax Treatment

a. Basic Requirements

b. Nondiscrimination and Coverage

c. Minimum Participation and Age and Service Requirements

d. Accrued Benefit and Vesting

e. Benefit and Contribution Limits

f. Integration with Social Security (Permitted Disparity)

g. Distribution Rules

h. Top-Heavy Requirements

i. Plan Loans

4. IRAs

B. Nonqualified Deferred Compensation Plans

1. In General

a. Definitions

b. Reasons for Using NDC Plans

c. Types of NDC Plans

d. Goals

2. Tax Considerations

a. In General

b. Constructive Receipt

c. Selecting the Method of Payment

d. Economic Benefit Doctrine

e. Other Tax Issues

3. Rabbi Trusts and Surety Bonds

a. Introduction

b. Rabbi Trusts

c. Surety Bonds

d. Other Third-Party Guarantees

4. Secular Trusts

5. ERISA

6. American Jobs Creation Act of 2004 and § 409A

C. Spousal Rights

1. Survivor Annuities

2. Consent

3. Plans and Distributions Not Subject to Qualified Survivor Annuity or Consent Rules

4. Planning with Respect to Spousal Rights

5. Community Property Law Considerations

a. Introduction

b. Qualified Retirement Plans

c. IRAs

d. Gift and Estate Taxes

II. Transfer and Income Taxes; Penalty Taxes

A. Transfer Taxes

1. Gift Taxation

2. Estate Taxation

a. Includibility and Transition Rules

b. Qualifying for the Marital Deduction

c. Other Considerations

(1) Credit Shelter Trust

(2) Distributions to Charitable Organizations

(3) Payment of Estate Taxes

3. Generation-Skipping Transfer Tax

B. Income Tax

1. In General

2. Qualifying for Lump-Sum Treatment

3. Former Special Averaging and Capital Gain Treatment

4. Employer Securities

5. Income in Respect of a Decedent

6. Rollovers

a. In General

b. Eligibility for Rollover

Content

c. Spousal Rollovers

d. Conduit IRAs

e. Nonspousal Rollovers

f. Other Rules

C. Penalty Taxes

1. Introduction

2. Premature Distributions

3. Minimum Distribution Requirements

a. Introduction

b. Required Beginning Date

c. Distributions During Participant's Lifetime

d. Distributions Upon Participant's Death Before RBD

e. Distributions upon Participant's Death After RBD

f. Spousal Rollovers and Inherited IRAs

g. Designated Beneficiary

h. Trustee as Beneficiary

i. Effective Dates

j. Conclusion

4. Excess Retirement Distributions

5. Excess Retirement Accumulations

III. Planning

A. Before Retirement

1. Introduction

2. Spouse as Beneficiary

3. Marital Trust as Beneficiary

4. Credit Shelter Trust as Beneficiary

5. Other Issues in Naming Beneficiaries

B. Planning at Retirement

1. Introduction

2. Deferral of Benefits

3. Minimum Distribution Rules

4. Rollovers

5. Special Income Tax Treatment

C. Planning After Death of the Participant

1. Use of Disclaimers

2. Dealing with IRD Issues

D. Estate Planning for Nonqualified Plan Benefits

1. Death Benefit Only Plans

2. Income in Respect of a Decedent

Working Papers

Table of Worksheets

Worksheet 1 Uniform Lifetime Table for Required Distributions

Worksheet 2 Single Life Table for Required Distributions

Worksheet 3 Excerpts from Joint and Last Survivor Table

Worksheet 4 Chart for Determining Applicable Distribution Period

Worksheet 5 Illustration of Tax Consequences of Retirement Plan Left to a Generation-Skipping Trust

Worksheet 6 Sample Beneficiary Designations and Trust Language

Worksheet 7 Workshop Problem Illustrating Distribution Options

Bibliography

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Treasury Regulations:

Proposed Regulations:

Labor Regulations:

Treasury Rulings:

Cases:

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