Trustees' Dilemma With Section 643Trustees' Dilemma With Section 643
When a retirement plan death benefit is payable to a trust, what is the income beneficiary entitled to? Recently released Internal Revenue Service final regulations defining trust income defer to state law. The 1997 Uniform Principal and Income Act (UPIA) is now law in a majority of states, but its rules for retirement plan distributions may not meet the regulation's reasonable-apportionment test.
Natalie B. Choate, of counsel, Bingham McCutchen LLP, Boston
When a retirement plan death benefit is payable to a trust, what “income” is the income beneficiary entitled to? Recently released Internal Revenue Service final regulations defining trust income defer to state law. The 1997 Uniform Principal and Income Act (UPIA) is now law in a majority of states, but its rules for retirement plan distributions may not meet the regulation's reasonable-apportionment test. Here are some possible solutions to the dilemma.
PROBLEMS
Say John Doe dies, leaving his $2 million individual retirement account payable to the John Doe Marital Trust and a separate $1 million IRA to the John Doe Family Trust. The substantive terms of both trusts are the same: ...
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