Experienced estate-planning practitioners know that the promise of the stretch IRA — to prolong the account's tax-deferred or tax-free status thereby allowing its assets to grow — often is thwarted if a trust isn't used to guard against beneficiaries. Too often, beneficiaries who receive retirement plan assets outright sabotage the stretch by withdrawing more than the required minimum distributions (RMDs), if not the entire amount. Trusts are needed to keep larger retirement funds in the family bloodline, ensure maximum income tax deferral, use generation-skipping leverage and provide asset protection benefits. Unfortunately, the income tax rules regarding the use of trusts for retirement benefit bequests are at times illogical, unclear and, even when clear, sometimes problematic.1

Luckily, another option is increasingly available: the trusteed IRA. After the IRA owner's death, there can be tremendous estate-planning advantages to a trusteed IRA — provided the IRA provider is advanced, the IRA trustee is flexible, and the owner opts for robust beneficiary designation planning. Indeed, a trusteed IRA can combine many of the estate and asset protection planning advantages of a trust while ensuring the simplicity, compliance and income tax benefits of an ordinary IRA. In essence, an IRA owner can create a conduit trust without the complexities of a separate instrument.

Definitions

Recall that the conduit trust example creates a seemingly simple safe harbor for qualifying as a see-through trust:2 If the trust mandates that the trustee pay any distributions from the IRA “immediately” to the designated beneficiary, only that particular beneficiary is considered when determining life expectancy.3 With a conduit trust, the remainder and contingent beneficiaries of the trust are irrelevant — even if they are a charity, an estate or other entity without a life expectancy.

The accumulation trust example is murkier but describes a trust that might “accumulate” IRA distributions in the trust for eventual payout to beneficiaries.4 Absent conduit trust language, most traditional long-term trusts will need to comply with this example. With such trusts, all potential takers to the IRA benefits must be considered to determine the life expectancy payout. It is unclear exactly what the rules are in determining which beneficiaries to consider.

So what exactly is a trusteed IRA?

There are two legal forms of individual retirement accounts:5 a “custodial IRA” under Internal Revenue Code Section 408(h) and a “trusteed IRA” under IRC Section 408(a). Historically most IRAs have been opened as custodial accounts. Trusteed IRAs have been much rarer.

There is no federal income tax difference between the two forms.6 While an IRA owner is living, state law differences are unlikely to surface,7 because most litigation surrounding IRAs pertains to the tax treatment rather than the legal form of the agreement.

As an estate-planning vehicle, the effectiveness of the trusteed IRA depends on how flexible the trusteed IRA is, which in turn depends on the IRA provider. Some IRA providers have forms with just a few boxes to check for different options. Some smaller banks may want counsel to come up with the entire designation. Others strike a balance by having a simple beneficiary designation form with the most commonly customized provisions left blank for client's counsel to choose from additional options for flexibility.

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An example may help: Jane Doe is retired and has a $2 million rollover IRA. This is the bulk of her estate. She would like to leave half of the IRA to her daughter and half to her son. Her daughter is nice enough, but on her fifth marriage. Her son is a bachelor and, although hard working, is also hard living. She moves her IRA to a trusteed IRA and checks a box on the beneficiary designation form stating: “I would like to choose restricted payout options for this beneficiary.” An additional form restricts the payout options to the beneficiary to the RMDs and limits the beneficiaries' ability to appoint remaining funds at their deaths, with room for counsel to add further guidance.

Jane's attorney helps her customize the two most commonly addressed issues: What additional distribution standards or discretion, if any, to give the trustee to go beyond this floor? And what limited or general powers of appointment to allow the beneficiary?8

Thus, Jane provides for different distribution standards for each beneficiary, ensuring that improvident spending or spousal influence will not blow the stretch income tax deferral possibilities.

Payout options for a trusteed IRA can be customized in ways similar to a conduit trust, provided that one complies with the strictures of the IRA rules. Obviously, IRA trustees would reject some customizations as inappropriate, such as provisions for an individual co-trustee or for investment in insurance or collectibles, which would disqualify the IRA.9 But the most common distribution provisions are probably acceptable: An owner can mandate that only the RMDs be paid to a beneficiary until a certain age, after which point restrictions become more liberal. Or the owner can state that only the RMDs be paid out unless additional distributions are needed for emergency or for the ubiquitous “health, education and support.” An owner also may limit the ability of a beneficiary to name another beneficiary or define the class of permissible appointees, thus keeping funds in the family bloodline.

Because the RMDs of a trusteed IRA must be paid to the beneficiary after the owner dies, the trusteed IRA essentially is a conduit trust — but without being a separate entity. And not being a separate entity means avoiding significant complexity and uncertainty. What complexities and uncertainties do I mean? They can be broadly divided into several categories: post-mortem tax and trust accounting, triggering income in respect of a decedent (IRD), post-mortem compliance titling and transfer, determining the measuring life expectancy for RMDs, professional management, planning for different IRAs, generation skipping transfer (GST) tax planning and prohibited transaction risk. Let's look at these more carefully.

  • Post-mortem Tax and Trust Accounting — A trusteed IRA provider sends one Form 1099-R to each beneficiary. This is much cheaper, easier and less complex than even the simplest trust, which would require Forms 1099-R, 1041 and K-1. It is difficult to explain to grantors and beneficiaries the differences in definitions of “income” that become so complicated in trusts that receive retirement benefits. Fiduciary accounting income may have little relation to RMDs or IRA distributions that beneficiaries commonly understand. The Uniform Principal and Income Act is hardly intuitive and has led to problems with trusts holding IRAs.10

    Even conduit trusts that appear simple on the surface have unsettled issues. What does the IRS mean by requiring distributions from the IRA go “directly to” the beneficiary?11 Is 60 days fast enough? 180 days? Within the year? Can a trustee wait until March of the following year to distribute and make the 65-day election?12 No one really knows.

    Also, must the retirement plan distributions in a conduit trust be traced? Generally, fiduciary income tax rules do not trace income. But a strict reading of the conduit trust example may easily be construed to require tracing for purposes of the designated beneficiary safe harbor. Imagine that a trustee of a conduit trust receives $50,000 in income from non-IRA sources, then pays out $40,000 to a beneficiary, then later gets a $40,000 IRA distribution. Does the trustee have to strictly follow the safe harbor by immediately distributing the $40,000 IRA distribution, or is this requirement already satisfied? Does the character of the first $40,000 received matter, such as whether it is ordinary income, qualified dividends or tax-exempt interest? Does it matter whether distributions from the IRA are stocks in kind but the trust pays out cash or vice-versa?

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  • If sloppy administration or misunderstandings lead to failed compliance with the conduit trust safe harbor, could the IRS make an argument that the trust never was a see-through trust, similar to the IRS' successful attack on a mis-administered charitable remainder trust in Estate of Atkinson v. Commissioner?13 In Atkinson, a trustee missed some mandatory charitable remainder trust payments and the tax court disqualified the trust retroactively to its inception. It would not be unheard of for an amateur trustee to do the same for conduit trust payments, especially if the trustee is the beneficiary. Without ongoing contact and review with trustees, this could be a problem. While an Atkinson-type retroactive disqualification seems rather extreme, even a prospective disqualification as a see-through trust could be disastrous.

  • Triggering IRD — Leaving retirement plan assets to a separate trust that has a pecuniary share formula may inadvertently trigger the income built up in the IRA upon funding a subtrust. To simplify the IRS position,14 funding a pecuniary obligation (for example, the $3.5 million credit shelter commonly found in a married couple's trusts) with a $2 million IRA could trigger up to $2 million of income in IRD. Most IRAs (with rare exceptions such as non-deductible IRAs that have basis or Roth IRAs) are 100 percent IRD, meaning that the beneficiaries are still liable for income tax on all the distributions when they are received. Needless to say, triggering all this income tax early through a poorly considered AB funding clause could be a complete disaster.

  • Post-mortem Compliance, Titling and Transfers — A trustee must timely provide a copy of the trust or qualifying documentation to the IRA custodian/trustee as a prerequisite for qualification as a see-through trust.15

    With a trusteed IRA, the trustee already has the IRA trust document.

    Every time the titling on an IRA changes, there are more opportunities for disastrous titling gaffes, not to mention ample opportunity for frustration with uncooperative IRA custodians. A non-professional trustee dealing with a high-volume discount IRA provider may very well mistitle such an account. To the IRS, form often outweighs good intentions. In Private Letter Ruling 200513032, a decedent left his IRA at death to his trust as beneficiary. The trustee (his child), with incompetent help from the investment firm, subsequently botched the titling. The IRS denied relief and the entire income in the IRA was triggered.

    Trusteed IRAs avoid these tricky titling changes and in-kind transfers that often occur between the decedent and the master trust, subtrusts and beneficiaries when a separate trust is named.

  • Drafting Issues and Determining the Measuring Life Expectancy for RMDs — Even when a trust qualifies as a see-through trust, it must use the life expectancy of the oldest beneficiary of the trust (for example, if the trust splits into three shares for age 25-, 27-, 35-year-old beneficiaries, the life expectancy of the 35-year-old may have to be used. If there is a 1 percent share for a 75-year-old, that beneficiary's life expectancy may have to be used for the entire conduit trust).16 But there is a distinction when subtrusts are named at the level of the retirement plan/IRA beneficiary designation form.17 Because a trusteed IRA is effectively divided after death into separate subtrusts at the beneficiary designation form level, this oldest beneficiary rule is less likely to be an issue for a trusteed IRA. Remember that such qualification (whether naming subtrusts or using a trusteed IRA) is still dependent on establishing separate accounts by December 31 of the year after death.18

    There are unanswered issues regarding trust provisions that may allow payments for an estate's debts, expenses and taxes from the trust. The potential threat, envisioned in several PLRs, is that this effectively makes the estate a beneficiary of the IRA, thus disqualifying the trust as a designated beneficiary. Although the IRS has been liberal in several PLRs and there is yet no adverse case, it remains a danger that advisors should draft to avoid.19

    Qualifying a separate trust as an accumulation trust can be dicey. Writing for the February 2006 issue of the American Bar Association's Probate and Property magazine, Keith A. Herman, an attorney in the St. Louis branch of the law firm Greensfelder, Hemker & Gale, P.C., warned: “Because of the uncertainty in this area of the law, a private letter ruling should be obtained before naming such a trust [an accumulation trust] as a beneficiary.”20 The American College of Trust and Estate Counsel echoed similar fears in an Oct. 23, 2007, letter to the IRS requesting a revenue ruling to clarify many of the issues surrounding accumulation trusts.21 Many experienced attorneys believe this reticence is overcautious and that the many PLRs issued, in conjunction with the Regulation, are sufficient to guide them in drafting accumulation trusts. But of course PLRs can always be “reversed.” Witness the IRS' recent change of mind within only one year as to whether it would honor post-mortem beneficiary designation reformations for see-through trust purposes.22 Building an estate plan on PLRs always should give one pause.

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  • Some attorneys despise the conduit trust model because the assets are forced to be distributed during the beneficiary's lifetime — and a beneficiary might outlive the distributions. That's a fair criticism if the goal were long-term protection of the entire principal. But if the IRA were say $1 million of a $4 million estate, the RMD from the entire estate holding a conduit trust or trusteed IRA for a 35-year-old would be about half of 1 percent, or only about 1 percent for a 60-year-old.23

    Accumulation trust drafting typically entails restricting use of general powers of appointment or broad limited powers of appointment that may bring older or non-individual beneficiaries into consideration under the designated beneficiary rules. This limitation is especially problematic when you have a GST-exempt and non-GST exempt split when a general power of appointment otherwise would be desirable in the GST-non-exempt share.24

    This consideration of all possible beneficiaries required for accumulation trusts could also be a serious problem with the increased use of decanting statutes (now in six states), trust protectors and other provisions that allow discretionary accumulation trusts to decant to another dissimilar trust after September 30 of the year after death (the “snapshot” date when the IRS looks to see who the potential beneficiaries are). The possibility of decanting may make the remote trust beneficiaries uncertain rather than “identifiable.”

    Caution also should be used when accumulation trusts name charities as potential remainder or even contingent beneficiaries. Unlike trusteed IRAs or conduit trusts that allow us to ignore contingent beneficiaries, naming a charity as a beneficiary may disqualify an accumulation trust from qualifying as a designated beneficiary. But excluding charities as contingent beneficiaries runs counter to many people's estate-planning goals.

    Another issue, especially for conduit trust drafting, is that, as trusts have become more sophisticated, many have clauses that might interfere with payment of the IRA distributions if not drafted around. Similar to the decanting issue mentioned, provisions such as broad spendthrift clauses that cause a forfeiture of a beneficiary's interest, shifting executory interests, hold-back clauses, lifetime powers of appointment, trust protector provisions, incentive/disincentive clauses and the like may negatively affect the certainty of the “conduit” and thus qualification as a see-through trust.

  • Professional Management — Separate trusts risk double dipping for trustee and investment fee expenses. For instance, a trust may pay load fees or wrap investment management fees of 1 percent or more, plus the trustee's fee. A trusteed IRA typically has one fee. While trusteed IRAs can use outside investment management like any directed or delegated trust (depending on the provider), it's generally more economical to combine the two duties.

    Having a professional trustee also dramatically reduces the risk of mismanagement or embezzlement.25 Mismanagement can not only cause investment losses, but it can also destroy the asset protection afforded in bankruptcy or state law.26 It also avoids the risk that an individual trustee might change citizenship/residence to another country and cause the trust to be treated as a “foreign trust” — which could trigger additional compliance or income tax, or subject the trust to taxation in the foreign country.

  • Planning for Differences Between Different Types of IRAs — Planning with significant Roth IRAs is easier with trusteed IRAs. There is always a danger that a trust has completely inappropriate language and administration for the two completely different tax animals. Having trusteed IRAs separate from the master trust makes it easier to use differing powers of appointment, GST tax allocation and discretionary distribution language that is clearly called for in such situations. With the income limitations for Roth conversions due to be lifted in 2010, this will be a bigger issue in years to come.

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  • GST Tax Planning — Roth and traditional IRAs require different planning considerations. A trusteed IRA, by keeping the IRA assets separate, makes GST exemption allocation easier. In small estates under the exemption amount, a trusteed IRA or trust holding IRAs will have GST exemption allocated, but for larger estates it is usually more advantageous to have GST exemption allocated to non-IRD, non-wasting assets. Thus, with the possible exception of Roth IRAs, GST exemption is usually allocated to non-IRA assets. Allocation of exemption becomes more complicated to accomplish with a trust holding IRA, Roth IRA and non-IRA assets together, which may lead to wasted or inefficient use of the exemption.

  • Prohibited Transaction Risk — There may be a prohibited transaction danger lurking when a family member is a trustee and takes a trustee fee for his services for managing retirement plan assets in trust (which is somewhat common). Prohibited transaction rules, enforced by both the IRS and the Department of Labor, are often confusing and unclear. While there is no on-point case law and this issue appears well below the IRS radar screen, one distinguished commentator, Seymour Goldberg, a lawyer, accountant and MBA who's a senior partner in the Jericho, N.Y., law firm of Goldberg & Goldberg, P.C., and a professor at Long Island University, recently opined that “It is not certain if that [IRC Section 4975(f)(6) exemption] applies to trustee fees where the trust is the beneficiary of an IRA and the trustee is a relative of the IRA creator and also a relative of the trust beneficiary, but that also might be a prohibited transaction.”27 If the IRS or DOL ever pursued this aggressively, it could create serious problems for many trusts with family members as paid trustees holding retirement assets.

  • Disadvantages of a Trusteed IRA Versus a Conduit or Accumulation Trust — A trusteed IRA cannot fit every situation. While the number of providers is increasing, only a handful of banks and trust companies currently provide them and they generally have larger minimum account sizes: typically $500,000 to $1 million, but perhaps less if other non-IRA assets are managed. Even if a client wants to transfer accounts to a trusteed IRA and meets the minimum requirements, qualified plans generally cannot be rolled over while the owner is still employed (especially if the employee is under 59 ½). And, while the latest federal bankruptcy act largely put IRAs on equal footing with other retirement plans in bankruptcy, in some states protection is more limited for IRAs outside of bankruptcy.28

Purely discretionary trusts have superior asset protection to trusteed IRAs or any trusts that have mandatory payouts.29 Thus, the purely discretionary accumulation trust is ideal for extreme situations such as special needs trusts or beneficiaries with anticipated creditors or special problems such as tax liens.30 While “pay to or for the benefit of” language might give some flexibility to protect mandatory RMD payouts in a trusteed IRA or conduit trust, and most states still protect mandatory payment spendthrift trusts from garnishment,31 a purely discretionary trust still has the greatest flexibility and protection.

Additionally, conduit trusts and trusteed IRAs are not optimal users of GST and estate tax exemption amounts. Due to mandatory payments, they “leak” out distributions that could be better leveraged if left in trust. Of course, retirement plan assets in general are not optimal for funding GST-exempt or bypass trusts, because even if funds are “accumulated,” they have built-in tax depleting their value and risk being taxed at the compressed trust income tax brackets.

Think About It

Nothing is a panacea to the dilemma of estate planning for IRAs — not a trusteed IRA, conduit trust nor an accumulation trust. And none of these is worth the complexity of drafting or explaining to clients for smaller accounts. But it's no longer uncommon to see rollover IRAs exceeding $1 million. Naturally, many clients want to integrate this asset with the rest of their trust planning.

Trusteed IRAs offer a simpler compliance and administrative solution for the client, beneficiaries and the attorney. Until the IRS clarifies its position on accumulation trusts with more than PLRs, trusteed IRAs will continue to increase as an important option for conservative clients and practitioners.
Portions of this article are taken from the author's other articles that have appeared in Journal of Retirement Planning or ABA Probate and Property.

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Endnotes

  1. See, generally, Natalie B. Choate, “Trusts as Beneficiaries of Retirement Plans,” Life and Death Planning for Retirement Benefits, 6th Ed., Chapter 6, (Ataxplan Publications, Boston, Mass., 2006).
  2. By “see-through” trust, I mean a trust qualifying to use the life expectancies of the beneficiaries, which is usually advantageous; see the four general requirements at Treasury Regulations Section 1.401(a)(9)-4, A-5.
  3. See Treas. Regs Section 1.401(a)(9)-5 A-7, Ex 2.
  4. See Treas. Regs. Section 1.401(a)(9)-5 A-7, Ex 1.
  5. Not to mention an individual retirement annuity under Internal Revenue Code Section 408(b).
  6. IRC Section 408(h).
  7. Perhaps the form would matter in a breach of fiduciary duty lawsuit or in “magic wand” trust funding such as in Stephenson v. Stephenson, 163 Ohio App. 109, 2005-Ohio-4358, in which a court held that a custodial IRA's owner changed ownership (whether purposefully or inadvertently) to a living trust during his lifetime by listing it on the Schedule A of his living trust purporting to transfer assets. The court did not address whether the legal form of the IRA would make a difference, but it's likely that a trusteed IRA's ownership could not be changed in such a manner, because the legal (as opposed to equitable) owner is not the IRA owner, but rather the bank as trustee.
  8. What, in IRA beneficiary designation parlance, would be a “Beneficiary Designation of Beneficiary.”
  9. See, for example, IRC Section 408(a)(3).
  10. Indeed, there are 2008 amendments to the Uniform Principal and Income Act, in part to correct the Internal Revenue Service's qualified terminable interest property disqualification ruling regarding default accounting rules in Section 409 in Revenue Ruling 2006-26. See www.nccusl.org.
  11. “[A] ll amounts distributed from A's account in Plan X to the trustee while B is alive will be paid directly to B upon receipt by the trustee of Trust P.” Treas. Regs. Section 1.401(a)(9)-5 A-7, Ex 2.
  12. IRC Section 663(b).
  13. Estate of Atkinson v. Commissioner, 115 T.C. 26, aff'd, 309 F.3d 1290 (11th Cir. 2002).
  14. See IRS Chief Counsel Memorandum 200644020.
  15. By October 31 of the year after death, see Treas. Regs. Section 1.401(a)(9)-4, A-5(b)(4), A-6.
  16. Treas. Regs. Section 1.401(a)(9)-4, A-5(c).
  17. See Private Letter Ruling 200607031.
  18. Treas. Regs. Section 1.401(a)(9)-8 A2.
  19. See, for example, PLR 200608032.
  20. Keith A. Herman “Coordinating Retirement Accounts with Estate Planning 101 (What Every Estate Planner Needs to Know),” ABA Probate and Property, Jan/Feb 2006.
  21. www.actec.org/public/Governmental_Relations/MarksteinComments8_10_07(2).asp.
  22. Permitting: PLRs 200616039-41; disallowing: PLR 200742026.
  23. Using divisor of 48.5 and 25.2 respectively, leading to only $20,618 or $39,682 in distributions. While the IRA would be depleted over the beneficiary's life expectancy, this simply allows the rest of the trust estate to grow.
  24. Some argue that a “Delaware tax trap” provision could be inserted to permit triggering estate inclusion without violating accumulation trust rules, but, again, it is unclear whether this works.
  25. See, Diana B. Henriques, “Questions for a Custodian After Scams Hit IRAs,” The New York Times, July 25, 2009.
  26. See, for example, In re Ernest W. Willis (Bankr. S.D. FL Aug 6, 2009) (bankruptcy), Aebig v. Cox, 2006 Mich App. Lexis 1695 (state law), both cases where self-dealing and prohibited transactions cost the owner creditor protection.
  27. Ed Slott's IRA Advisor Newsletter, April 2007, p. 7.
  28. See Section 224 of the Bankruptcy Abuse Protection and Consumer Protection Act of 2005, new provisions protecting IRAs and other plans at 11 U.S.C. Section 522.
  29. Note that an accumulation trust may have a mandatory payout as well. Any trust where the trustee shall pay “all net income at least annually” is such a trust that is probably not a conduit trust (unless income is defined to include all distributions from qualified plans/IRAs).
  30. For a great discussion of this in regards to protecting trust assets from the IRS as creditor, see Bryan T. Camp “Protecting Trust Assets from the Federal Tax Lien,” Estate Planning and Community Property Law Journal, 2009.
  31. See, for example, Uniform Trust Code Section 506.

Edwin P. Morrow III is an estate-planning wealth specialist with Key Private Bank in Dayton, Ohio

SPOT LIGHT

Contemplative- Zeng Fanzhi's oil on canvas “Untitled (Boy),” about 98 inches by 66 inches, painted in 2005, sold for U.S. $382,160 at Christie's “Post-war and Contemporary Art Evening Sale” on June 30, 2009 in London.

Why I Like Trusteed IRAs

Just look at how much more effective it is after an owner's death for estate planning

Characteristics IRA Payable To Accumulation Trust Beneficiary IRA Payable To Conduit Trust As Beneficiary Custodial IRA With Individual As Beneficiary Trusteed IRA With Individual As Beneficiary
During Owner's Lifetime



Income Tax Deferral During Owner's Life yes yes yes yes
Optimal Tax Table if Spouse >10 Years Younger no yes yes yes
Can Customize Beneficiary Designation Form NA NA very limited yes
Ability To Pay RMD in Incapacity Situation NA NA no yes
Any IRA Permitted Investment Choices NA NA yes yes
Appropriate for Small Asset Level no no yes no
Attorney Fees for Drafting/ Review/ Updating
(depends on amount of customization)
high medium low low-medium
Appropriate for QRP While Owner Working
(unless or until IRA rollover is available)
yes yes no no
After Owner's Death



Allows Beneficiaries to Stretch Out RMDs probably yes yes yes
Owner Can Restrict Beneficiary to RMD Floor yes yes no yes
Can Restrict Beneficiary to RMDs, But More With Discretion yes yes no yes
Can Restrict Trust So That Not Even RMDs Paid yes no no no
Allows Owner to Mandate Contingent Beneficiary (keep IRA in the family bloodline) yes yes no yes
Allows Longer Tax Deferral Via Dynamic, Unfixed Expectancy Tables no yes yes yes
Allows Spousal Delayed Required Beginning Date no yes yes yes
Confusion as to Whose Life Expectancy to Use yes no no no
Distributions Taxed at Highest Bracket > $10k potentially no no no
State Protection of IRA from Beneficiary's Creditors (see state statute, assume not in bankruptcy) no no usually not usually not
Spendthrift Protection from Beneficiary Creditors yes yes no yes
Pure Discretionary Trust (Optimum) Protection potentially no no no
Ability to Grant LPOA Equivalent limited yes no yes
Ability to Grant GPOA Equivalent no yes default yes
Trust Decanting Threatening See-through possibly no no no
Ability to Remove IRA from Beneficiary's Estate yes yes no yes
Can Name Charitable Contingent Beneficiary maybe yes yes yes
Can Ensure Vested Charitable Remainder no yes no yes
Problems for GST Non-exempt Planning yes no NA no
Leverage of $3.5MM ex. eq. (bypass/AB) optimal leaky none leaky
Possible Pecuniary Funding IRD Disaster yes yes no no
Note: IRA products/services vary widely. For instance, some custodial IRAs do not permit full stretch out; and some trusteed IRAs are so inflexible as to be no different than custodial IRAs. Of course, individual trusts vary even more and many clients may opt not to use the maximum protections. What's presented here are generalizations based on using the maximum capability and flexibility of the services. State law and individual plans differ.