By Steven A. Loeb, Esq., LL.M. (Taxation)
In PLR 201706004, the IRS stated in a private ruling that a court order approving a change in the beneficiary designation of a decedent's IRA from a trust that was never created, to the surviving spouse, did not create a designated beneficiary, and the entire interest in the IRA would have to be distributed to the spouse within five years following the decedent's death. However, if there was any good news - the PLR also stated that the surviving spouse could roll-over distributions made in the first four years after the decedent's death. See PLR 201706004 (Feb. 10, 2017); See Thomson Reuters Checkpoint Squib.
What this PLR (IRS ruling) brings to light yet again is that it is imperative that clients review their beneficiary designations routinely to ensure that they are in align with their estate planning goals. Having the ability to “stretch out” distributions from IRA’s allows for significant tax deferral. Additionally, a key takeaway from the above PLR is to ensure that if an IRA Trust is created within one’s estate plan and is intended to be utilized for IRA stretch out purposes and/or control purposes to ensure that the beneficiary’s distributions are not distributed prematurely in contrast to the creator’s wishes, it is imperative to properly complete beneficiary designation forms.
It is important to work closely with one’s financial advisor and estate planning attorney to ensure that the plan administrator of the IRA will accept the beneficiary designation forms and is in a format acceptable to the plan administrator of the IRA. Careful consideration needs to be in place to ensure that there are no errors on beneficiary designation forms, as these non-probate assets (assets that have a beneficiary and do not pass under a Last Will and Testament or Revocable Living Trust) with beneficiary designations will override the Last Will and Testament.
For more information please contact via email Steven A. Loeb, Esq. or by phone at 973-538-4700 ext. 229.
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