Newsletter: April 2009

April 07, 2009

In this issue: IRAs and RMDs, Charitable Lead Trusts

Greetings!

As we launch the revival of our monthly newsletter to you, our valued colleagues in the financial services industry, we hope you gain a sense of the energy and excitement we bring to our unique, time-proven approach to estate and wealth management planning. From this very first installment, you will find useful and practical information to educate both yourself and your clients, further cementing your indispensable role in their lives as a trusted advisor and planner.

Our years of research and dedication to creative approaches and design-based planning are focal points in our practice. The wealth of the associations that we have developed with financial planning professionals and institutions has allowed us to foster meaningful educational and collaborative relationships – bringing financial advisors, insurance representatives, accountants, entrepreneurs and attorneys together and challenging them to look at their clients’ financial plans in an entirely different way.

With the release of this monthly publication, we put some of our initiatives on display for you with the intent that you, too, will look at estate planning and design differently and see why Smith and Condeni is a one-of-a-kind legal practice.

IRAs and RMDs

New law waives required minimum distributions for calendar year 2009.

A new law enacted in late 2008 provides that retirement plan account participants, IRA owners and their beneficiaries do not have to take RMDs for calendar year 2009. The intent of the law is to grant relief to taxpayers who would otherwise be forced to sell stock or mutual fund shares held in retirement accounts to cover RMD when the value of those accounts are exceptionally depressed.

By not making the RMD for 2009 (or withdrawing less than the RMD) from their retirement plan accounts or IRAs, individuals will wind up with less taxable income for 2009, and, possibly, avoid or mitigate the effect of AGI-based phase outs of tax breaks. They will also have more tax-sheltered amounts to leave to their beneficiaries.

New law requires qualified plans to offer post-2009 rollover option for non-spouse beneficiaries. A provision in late 2008 legislation requires employer-sponsored qualified retirement plans to offer non-spouse beneficiaries the opportunity to roll over an inherited plan account balance to an IRA set up to receive the rollover on the non-spouse beneficiary's behalf.

This is an exceptional opportunity for clients, since many employer-sponsored plans have previously required either lump sum or 5-year distributions for non-spouse beneficiaries. However, practitioners must be mindful that while a spouse beneficiary will have a limited ability to correct an improper rollover to an IRA, non-spouse beneficiaries will have no such right to make a correction to cure an improper rollover.

This rule will become effective for plan years beginning after 2009. Until then, under current rules, qualified plans may, but are not required to, offer non-spouse beneficiaries this rollover option.

Charitable Lead Trusts

The time is right for implementing charitable lead trusts.

Charitable Lead Trusts (“CLTs”) are designed to provide a form of guaranteed payment to charity during the “charitable lead” term. At the end of the charitable lead term, the remaining assets may revert to the donor, be distributed, or remain in trust, for the benefit of other non-charitable beneficiaries, such as members of the donor's family.

A gift or bequest to a qualified CLT will be eligible for the federal charitable gift or estate tax deduction for the present value of the payments to be made to the charitable lead recipient, as well as for a possible income tax deduction.

CLTs have been among the most underutilized of estate and charitable planning methods. Now could be a perfect time to reverse that trend and provide considerable value to clients, since both asset values and interest rates are presently at historically low levels.
 

Please contact Smith and Condeni for more information. We look forward to hearing from you.