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Presented by Richard L. Randall Attorney & Counsellor at Law, Randall Law Offices, P.C.

Understand creditor protection for Inherited IRAs post-Clark decision. Learn distribution techniques, estate planning, and tax deferral strategies by legal expert Richard L. Randall. Gain insights on planning, beneficiary instructions, and key stories.

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Presented by Richard L. Randall Attorney & Counsellor at Law, Randall Law Offices, P.C.

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  1. Providing Creditor Protection for Inherited IRAs After the Clark DecisionContinuing Education ConferenceAugust 14, 2015 Presented byRichard L. Randall Attorney & Counsellor at Law, Randall Law Offices, P.C. (Chairman and CEO, National Network of Estate Planning Attorneys)

  2. Inherited IRA Creditor Protection

  3. Program Overview General Outline • Historically, Why Pay Distributions to Trust? • A Contrarian Approach: The Trust as Primary Beneficiary • Impact of the Clark v. Rameker Decision • Payment to Trust Can Be Done Without Negative Impact on Tax Deferral

  4. Retirement Plan Distributions Why Pay Distributions to a Trust? • Provide Instructions to Beneficiaries (Applies to Everyone) • Provide Protections to Beneficiaries (Applies to Everyone) • Death Tax Planning for Married Couples

  5. Key Stories to Master • School Bus • Trip to the IRS Supermarket • Hit Parade

  6. Limited Power of Appointment The “Hit Parade” • Kid Hits the School Bus • School Bus Hits the Kid • Marriage Hits the Rocks • Kid Hits the Bottle • Kid Hits the Books • Kid Hits the Lottery • Kid Hits the Skids

  7. Retirement Plan Distributions Why Pay Distributions to a Trust? Hit Parade • Many Clients Want Flexibility Provided by Limited Power of Appointment • Order of Beneficiaries Affects Whether Power of Appointment Can be Retained by Surviving Spouse

  8. Retirement Plan Distributions Why Pay Distributions to a Trust? Hit Parade • To Make this Work, We Must Name the Trust as Primary Beneficiary and Disclaim to the Spouse if Rollover is Desired • The Trust Must be Drafted to Qualify for Life Expectancy Distributions

  9. Limited Power of Appointment Naming the Trust Primary and the Spouse Contingent Beneficiary • A Spouse Can Disclaim and Still Receive Benefits In Trust (No One Else Can!) BUT NO ONE (Not Even a Spouse!) May Disclaim and Retain a Right to Direct Property

  10. Limited Power of Appointment Naming the Trust Primary and the Spouse Contingent Beneficiary • Spouse as Primary Beneficiary Must Disclaim the IRA and the Power of Appointment to Add Proceeds to Trust • Our Clients Say They Want Flexibility (“the Hit Parade” Power) • TRUSTEE Can Keep Property AND the “Hit Parade” Power OR Can Disclaim to Spouse

  11. Limited Power of Appointment Naming the Trust Primary and the Spouse Contingent Beneficiary • The “Shirley Memo” • Available to You on Request!

  12. Let’s Begin With How We Introduce Retirement Distribution/Estate Planning Integration Concepts to Clients

  13. The Truth About Estate Planning™ for Clients With Large Retirement Plan Balances

  14. Estate Planning Overview Most Estate Plans Just Don’t Work!

  15. Estate Planning Overview “The Snapshot Test”

  16. Estate Planning Overview Definition of Estate Planning I Want to Control My Property While I’m Alive and Well Plan for Me and My Loved Ones if I Become Disabled

  17. Estate Planning Overview Definition of Estate Planning • Give What I Have • To Whom I Want • When I Want • The Way I Want All While Assuring My Wisdom is Transferred Along with the Rest of My Wealth

  18. THE PLANNING PYRAMID™ SAVE TAXES EXPAND WEALTH PRESERVE WEALTH FAMILY ME “I want to control my property while alive and well, plan for me and my loved ones if I become mentally disabled, and then give what I have to whom I want, when I want and the way I want-- all while assuring my wisdom is transferred along with the rest of my wealth.”

  19. Estate Planning Overview The Planning Pyramid™ • Focuses on Client Goals • Solutions Make Planning Easier • Exposes Traditional Planning as “Upside Down”

  20. Estate Planning Overview Three Step Strategy™ • DEVELOP Your Plan with Counselling Oriented Planning Partners • COMMIT Yourself and Your Family to a Formal Continuing Maintenance and Education Program • SECURE Appropriate Assistance for You and Your Family to Transfer Your Wisdom along With the Rest of Your Wealth

  21. Retirement Plan Minimum Distribution Rules Under the IRS Final Regulations

  22. Minimum Distribution Rules The MYTH of Immediate Taxation! (The Mistaken Belief that the Entire Retirement Plan Must Be Taxed at Participant’s Death)

  23. Retirement Plan Distributions You Know More Than You Think! • Who Owns Account? • When Do You Pay Income Tax? • Penalty for Early Distribution • When You HAVE to Withdraw

  24. Retirement Plan Distributions A Simple Illustration: Inherit the Money vs. Inherit the Account!

  25. Retirement Plan Distributions Why is all this so important? • Income Tax Deferral • Income Tax Deferral • Income Tax Deferral

  26. Retirement Plan Distributions The Advantage of Tax Deferral Dollar Doubled Every Year for 20 Years • Taxed at 28% • Tax Deferred

  27. Retirement Plan Distributions The Advantage of Tax Deferral Dollar Doubled Every Year for 20 Years • Taxed at 28% $51,353.37 • Tax Deferred

  28. Retirement Plan Distributions The Advantage of Tax Deferral Dollar Doubled Every Year for 20 Years • Taxed at 28% $51,353.37 • Tax Deferred $1,048,576

  29. Retirement Plan Distributions Why Pay Distributions to a Trust? • Provide Instructions to Beneficiaries (Applies to Everyone) • Provide Protections to Beneficiaries (Applies to Everyone) • Death Tax Planning for Married Couples

  30. Retirement Plan Distribtions Remember, Minimums are Minimums! • For You • For Your Beneficiaries!

  31. Retirement Plan Distributions Why Pay Distributions to a Trust? Financial Instructions • Teach Potential Income Tax Deferral • Control/Direct the Deferral • Investment Philosophy • Investment Policy

  32. Retirement Plan Distributions Why Pay Distributions to a Trust? • Provide Instructions to Beneficiaries (Applies to Everyone) • Provide Protections to Beneficiaries (Applies to Everyone) • Death Tax Planning for Married Couples

  33. Retirement Plan Distributions So Why Pay Distributions to a Trust? To Provide Potential “School Bus” Protections! • Potential Creditor Protection • Potential Divorce Protection • Potential Illness Protection

  34. Wealth Reception Planning™ Our Experience • Initial Mindset is Normally a Barrier • With Education, Client’s “Snapshot” Changes • Need for Active Family Involvement Is Clear

  35. Trust Design Access and Control Mindset (Client’s) • “Don’t Want to ‘Pull Strings’ From the Grave” • “They’re Independent” • “It’s Their Job to Take Care of the Kids”

  36. Trust Design Trust Protections Mindset When is it OK for: • Ex-Spouse to get the inheritance you leave in a divorce proceeding? • Medicaid to require “spend down” of the inheritance you leave? • Catastrophic Creditor to get inheritance you leave?

  37. Trust Design Access and Control Mindset (Beneficiary) • How Much Do I Get? • When Do I Get It?

  38. Trust Design Strength of Personal Protections Is Affected By Beneficiary’s Access and Control: • Demand • Ask

  39. Trust Design Dual Planning Goals • Protection Against Outsiders • Practical Control by Beneficiary

  40. Retirement Plan Creditor Protection • Plans at Work Protected By Supreme Court Decision • Protection Extended to IRAs • Inherited IRAs Under Attack

  41. Retirement Plan Creditor Protection Inherited IRAs Under Attack • Split Decisions • Two States Had Negative Decisions • Indiana (Klipsch) and Florida (Robertson)

  42. Retirement Plan Creditor Protection Inherited IRAs Under Attack The Clark Decision

  43. Estate Planning Overview Clark v. Rameker June 2014 U.S. Supreme Court Case

  44. Retirement Plan Creditor Protection • “Retirement Funds” Receive Protection • Mom’s funds were in an IRA • Question: is an INHERITED IRA a “Retirement Fund” as to an Inheritor?

  45. Retirement Plan Creditor Protection The Court’s Rationale: • The holder of an inherited IRA: • may never invest additional money in the account. • is required to withdraw money from the account, no matter how many years they may be from retirement • may withdraw the entire balance of the account at any time-and for any purpose-without penalty

  46. Retirement Plan Creditor Protection Inherited IRAs Under Attack • Solution is to Pay Distributions Into Trust • IRA Can Still Be Attacked • “School Bus” Trust Protects IRA Like Any Other Asset!

  47. Federal Estate Tax Reduction Other Planning Goals • Potential State Inheritance Tax Planning • Estate Growth in Survivor’s Estate Could Cause Estate Tax • Disability Planning • Creditor and Predator Planning • Remarriage Protection • Planning for Blended Families • etc., etc.

  48. Retirement Plan Distributions For All These Reasons, We Find Clients Would Like to Pay Distributions Into Trust. What They Don’t Want to do is Lose Income Tax Deferral!!

  49. Retirement Plan Distributions Ten Minute “Technical” Review

  50. Retirement Plan Distributions Just Three Things to Remember: “As Easy as Blue, Yellow, Green”

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