No One-Hour Photo, Robin Williams’ Estate Plan Took Time to Develop

Cite: Eddy R. Smith, No One-Hour Photo, Robin Williams’ Estate Plan Took Time to Develop, TENN. B. J., December, 2015.

Gooooood morning, Tennessee! Renowned actor and comedian Robin Williams, for whom living was an awfully big adventure and who will be remembered longer than many dead poets, passed away in 2014. His talent made him wealthy, so in 2012 he rushed to august professional advisors, including a wizard of an estate planning lawyer who composed a sophisticated revocable trust to dispose of a portion of Williams’ estate.[1]

What interesting features do we see in Williams’ trust? How well did he play the “game for those who wish to find / a way to leave their wealth behind?”

Williams was no liar regarding his prenuptial promises. Hunting good will from his wife, Susan Schneider Williams (and her lawyers), Williams acknowledged in the trust his obligations under the prenuptial agreement that he and Mrs. Williams executed, and included a statement that those obligations are to be met by the trust. It is a good estate planning practice both to reference any prenuptial obligations and to make sure those obligations are satisfied through the estate plan.

Mrs. Williams will be able to afford an occasional night at the museum. Williams’ trust left a residence in further trust for Mrs. Williams. Giving someone lifetime use of real property (through a life estate or beneficial trust interest) with no cash for related expenses is bad form that might make the real property impossible to use or enjoy. Williams’ trust addressed this by adding to the wife’s trust a fund for upkeep, insurance, taxes and mortgage payments.

Williams was the captain, my captain, of his publicity rights. Unlike Michael Jackson’s estate plan,[2] Williams’ trust left the IRS stuck in Neverland because they can’t get their estate tax hooks into Williams’ valuable brand. The trust gives the rights to Williams’ “name, voice, signature, photograph, likeness and right of privacy/publicity” to a tax-exempt charity. Regardless of the value of such rights, they can cause no federal estate tax because the bequest is eligible for a 100-percent estate tax charitable deduction. If the King of Pop could see how Williams handled this, he might have Peter Pan envy.

The trust provided further that the rights of publicity could not be exploited (used) for 25 years after Williams’ death. Don’t expect to see digital Robin Williams in Disney commercials, movies or on stage at the Academy Awards. Apparently, Williams did not want any awakenings of his likeness anytime soon.

Each child got a square deal. When Williams’ trust divided the assets available for his children at his death, it did not divide the assets equally among them. It divided the inheritance at death such that, when all gifts from Williams to his children during life and at death were aggregated, the children were to receive equal amounts of total gifts. The disposition takes into account outright lifetime gifts and amounts allocated to the children from other trusts Williams created. There are many tax and non-tax reasons why parents make unequal gifts to children during life. If a parent wishes to “even up” everything in the end, a testamentary provision such as the one in Williams’ trust is just the patch the doctor ordered.

Carpe diem, kids. Williams’ trust provided a default disposition of each child’s trust at the child’s death. However, the trust also gave each child the power to redirect how the child’s trust assets pass to the child’s children. Such a power provides the child flexibility to modify the plan in light of the grandchildren’s needs and life circumstances.

The lawyer may lead two lives simultaneously. Apparently, Williams never had a friend like his estate planning attorney, because he named the lawyer as a successor trustee of the trust and anticipated that the lawyer also would serve as legal counsel to the executor of Williams’ estate and to the trustees of the trust. Extinguishing any fires of doubt about the attorney being paid to act as lawyer for the fiduciaries and changing character to be paid as a fiduciary, Williams’ trust explicitly approved such dual compensation.[3]

Who let the genie out of the bottle? Why are we able to read this trust and learn what Williams provided for his beneficiaries? Keeping estate planning details private is one reason for including the details in a revocable trust rather than a publicly available probated will. Many clients execute a will that “pours over” assets to an unfunded revocable trust, leaving busybodies frustrated by a will that simply leaves everything to the trustees. In this case, litigation over administration of the trust led to it being filed as an exhibit to a pleading available for public view. Shazbat!

Conclusion. For our clients with wealth, celebrity, multiple marriages, children or a desire to continue to employ their estate planning lawyer beyond the grave, some features of Robin Williams’ revocable trust are Oscar-worthy. Until next time, Nanu, Nanu.[4]

Notes

  1. The full trust agreement is available here: http://www.hollywoodreporter.com/thr-esq/robin-williams-restricted-explo…. We do not know what portion of Williams’ estate passed outside the revocable trust by beneficiary designation, rights of survivorship or other estate planning documents (including two other trusts referenced in the revocable trust).
  2. http://www.forbes.com/sites/janetnovack/2014/10/03/irs-we-made-a-mistake…http://www.accountingweb.com/tax/irs/update-a-new-way-to-tax-the-michael….
  3. The trust goes to great lengths to explain how strongly Williams wanted his lawyer, Arnold Kassoy, to be able to serve in multiple roles and to be paid separately for each. Good drafting, Mr. Kassoy. (Don’t mess with him, man; he’s a lawyer.)
  4. If you found some of the language in this column strange, it might help to watch more of Robin Williams’ movies and TV shows.
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Ed Smith to present at Nonprofit Law seminar

Ed Smith will present the Knoxville Bar Association’s seminar entitled “Nonprofit Law Update: Information Board Members and Staff Need to Know.”  Ed will provide a comprehensive checklist of best practices for a nonprofit to ensure its board and staff are keeping themselves and the organization compliant.  Afterwards, a panel of attorneys will discuss issues faced by nonprofit board members.  The seminar will take place on Wednesday, October 28, 2015 at the UT Conference Center.

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Strictly Speaking, When Is a Will Not a Will?

Cite: Eddy R. Smith, Strictly Speaking When Is a Will Not a Will?, TENN. B. J., August 2015.

“Close don’t count in baseball. Close only counts in horseshoes and hand grenades.”

– Hall of Fame baseball player Frank Robinson[1]

When is a will not a will, even when the testator, witnesses and drafting lawyer intend it to be a will?  When the statutory requirements for execution are not strictly followed.  The Tennessee Court of Appeals recently reiterated that point in In re Estate of Morris.[2]  The opinion should lead lawyers to check their will forms and clients’ existing wills to make sure they comply with the statute of wills.

Bill Morris Sr. purported to execute a will leaving his estate to two of his four living children and three of his four grandchildren by a deceased fifth child.  Mr. Morris’s signature appeared at the end of the body of the will, immediately followed by the caption “Affidavit.”  Underneath “Affidavit” appeared testimony from putative witnesses, followed by the witnesses’ signatures and then a notary acknowledgement.[3]  The witnesses signed nowhere else.

Mr. Morris’s two children who were omitted from the will filed a will contest, arguing that the will was invalid due to improper execution.  At issue was whether the witnesses signed the will in attestation, which is mandatory,[4] or signed a self-proving affidavit, which is optional.[5]  If they signed the will but not a self-proving affidavit, the will was validly executed but should not have been admitted to probate until the proponents produced affidavits of proof (or live testimony) from the attesting witnesses.  If the witnesses signed only a self-proving affidavit, an essential element of will execution was missing.  Can witness signatures on a self-proving affidavit, signed at the same time as the testator signed the will and claiming that the witnesses signed the will, be treated as signatures on the will?  Does it matter that the testator and the witnesses intended valid will execution?  Is close good enough, i.e., will Tennessee (as several states have done) apply a “substantial compliance” standard rather than “strict compliance?”[6]

Morris was controlled by two prior cases.  In In re Estate of Stringfield,[7] the testator signed the will but the witnesses signed only a self-proving affidavit.  It is unclear whether the witnesses signed the affidavit on the same day the testator signed the will or at a later date.  The Court of Appeals ruled that absence of the necessary witness signatures on the will invalidated the will.

In the 2012 Tennessee Supreme Court case In re Estate of Chastain,[8] even though the testator initialed the first two pages of the will and signed the self-proving affidavit on the same day as the witnesses signed the will, the absence of the testator’s signature at the end of the will invalidated the will.  The court held that Tennessee requires strict compliance with will execution formalities. Close is not good enough.

Chastain tells us that signing the self-proving affidavit cannot be treated as signing the will: “By requiring the affidavit to ‘be written on the will or, if that is impracticable, on some paper attached to the will,’ Tenn. Code Ann. § 32-2-110, a clear distinction is drawn between an affidavit of attesting witnesses and a will.”[9]  The Supreme Court declined to adopt the doctrine of integration, by which the affidavit could be deemed a part of the will.[10]  The will and the self-proving affidavit are legally separate and distinct documents.

In Morris, the witnesses clearly signed on the same day as the testator did and the “Affidavit” began on the same page as the testator’s signature.  The Court of Appeals found that neither fact made the witnesses’ signatures on the affidavit proper attestation of the will.

The opinion notes that the statute expresses a preference (but not a requirement) for the self-proving affidavit to begin on the same page as the end of the will.

The fact that a lawyer drafted the documents required legal words to be honored: “Where a will is drafted by a lawyer, technical words used therein must be given technical meanings … and [e]very word used by the testator is presumed to have some meaning.”[11]  Use of the title “Affidavit” meant that what followed was an affidavit, and the reference in the affidavit to the “foregoing” will was evidence that the affidavit was preceded by, not a part of, the will.[12]  Because the witnesses signed only a self-proving affidavit and failed to sign the will, the will was found to be invalid.

Is this result fair to Mr. Morris and the intended beneficiaries of the will?  A substantial compliance standard surely would work a fairer result in many cases where intention to make a will can be proved.  However, a strict compliance standard reflects the General Assembly’s public policy choice to reduce litigation.  A “close is good enough” standard would encourage wide variation in will formats and execution procedures, leading to an endless procession of litigated cases to determine which purported wills are good enough.  In the three legislative cycles since Chastain, the General Assembly has not adopted a substantial compliance standard or the doctrine of integration, or otherwise relaxed the statutory requirements for executing a will.

What should lawyers do in light of Stringfield, Chastain and Morris?  First, check the execution language in your will forms.  If there is any question whether all necessary elements are present, modify the forms.[13]  Consider referring to “this will” in the attestation clause and “the will” or “the foregoing will” in the self-proving affidavit.  Make sure the testator signs the will above the attestation clause and that the witnesses sign twice, once on the will and once on the self-proving affidavit.  No shortcuts.

Second, check whether any of your clients’ previously executed wills fail to comply with the statute of wills.  If so, contact the affected clients and suggest that they sign new wills (hoping that all such clients are still living and competent to do so).[14]

Third, make sure your office meticulously follows a uniform procedure every time a will is executed.  If you are ever called to be a witness regarding the execution of a specific will, you likely won’t remember that occasion specifically, but can testify that your firm does it the same way every time, without exception.

Perhaps one day the General Assembly will relax will execution standards.   Until then, close counts only in horseshoes, hand grenades — and substantial compliance states.

Notes

  1. “More Info on Frank Robinson,” ESPN Classic, http://espn.go.com/classic/000728frankrobinsonadd.html, citing Timemagazine (July 31, 1973).
  2. In re Estate of Morris, 2015 Tenn. App. LEXIS 62, cert. denied, No.  M2014-00874-SC-R11-CV (Tenn. June 15, 2015).
  3. The relevant portions of the will are reproduced in the Court of Appeals opinion at http://tncourts.gov/sites/default/files/inreestateofmorrisopn.pdf.
  4. Tenn. Code Ann. section 32-1-104, which has remained largely unchanged for more than seven decades, provides as follows:
    The execution of a will, other than a holographic or nuncupative will, must be by the signature of the testator and at least two witnesses as follows:
    (1) The testator shall signify to the attesting witnesses that the instrument is the testator’s will and either:
    (A) The testator sign;
    (B) Acknowledge the testator’s signature already made; or
    (C) At the testator’s direction and in the testator’s presence have someone else sign the testator’s name; and
    (D) In any of the above cases the act must be done in the presence of two attesting witnesses.
    (2) The attesting witnesses must sign:
    (A) In the presence of the testator; and
    (B) In the presence of each other. (Emphasis added.)
  5. Tenn. Code Ann. section 32-2-110 allows the use of a “self-proving affidavit” in lieu of the witnesses’ live testimony to establish the facts necessary to admit the will to probate:
    Any or all of the attesting witnesses to any will may, at the request of the testator or, after the testator’s death, at the request of the executor or any person interested under the will, make and sign an affidavit before any officer authorized to administer oaths in or out of this state, stating the facts to which they would be required to testify in court to prove the will, which affidavit shall be written on the will or, if that is impracticable, on some paper attached to the will, and the sworn statement of any such witnesses so taken shall be accepted by the court of probate when the will is not contested as if it had been taken before the court. (Emphasis added.)
  6. See Dan Holbrook, “Questionable Will Executions: Should ‘Substantial Compliance’ Suffice?,” Tennessee Bar Journal, April 2012, http://www.tba.org/journal/questionable-will-executions-should-substanti…, for discussion of the strict compliance and substantial compliance standards.
  7. In re Estate of Stringfield, 283 S.W.3d 832 (Tenn.Ct.App. 2008).
  8. In re Estate of Chastain, 401 S.W.3d 612 (Tenn. 2012).
  9. Id., at 620.
  10. See In re Estate of Morris, 2015 Tenn. App. LEXIS 62, at *8-9, citing In re Estate of Chastain, 401 S.W.3d 612, 622 (Tenn. 2012):
    In essence, Appellees are asking this Court to apply the doctrine of integration by which “a separate writing may be deemed an actual part of the testator’s will, thereby merging the two documents into a single instrument.” In re Will of Carter, 565 A.2d 933, 936 (Del. 1989). In In re Estate of Chastain, 401 S.W.3d 612 (Tenn. 2012), the Tennessee Supreme Court held that the decedent’s signature on the affidavit did not satisfy the statute requiring the testator’s signature on a will. The Chastain court explained that, in these types of cases, Tennessee has not adopted the doctrine of integration “because doing so would amount to a relaxation of statutory requirements.”
  11. Id., at *6-7, quoting Daugherty v. Daugherty, 784 S.W. 2d 650, 653 (Tenn. 1990).
  12. Referring to the “foregoing” will in the attestation clause need not be fatal. Tennessee Legal and Business Forms, section 28:273, does so, but explicitly says the clause is part of the will: “the foregoing instrument, consisting of [____] pages, including the page on which we have signed as witnesses. …” 4 Tenn. Legal & Bus. Forms, § 28:273.
  13. When using commercial forms, take care to understand how the forms are structured. Form resources routinely provide complete and partial will forms. Some include an attestation clause and self-proving affidavit, but others, to avoid repetition, require the user to add those elements from another form.
  14. Also contact your malpractice insurance carrier if required under the policy.
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Can IRA Beneficiaries Trust Creditor Protection Without a Trust?

There are planning options to protect inherited retirement accounts from the beneficiaries’ creditors.

Cite: Eddy R. Smith, Can IRA Beneficiaries Trust Creditor Protection Without a Trust?, TENN. B. J., April 2015.

At the end of the third quarter of 2014, an estimated $7.3 trillion was held in Americans’ individual retirement accounts (IRAs), almost 11 percent of all household financial assets in the United States.[1] A recent United States Supreme Court ruling means that, without good estate planning, a significant portion of that wealth might not be protected from creditors when it passes to beneficiaries at the owners’ deaths.

In Tennessee, retirement accounts are well protected from creditors while the initial owner is living.
In federal bankruptcy. Tennessee is in the majority of states that have “opted out” of Bankruptcy Code section 522(b)(2) exemptions, meaning Tennessee bankruptcy debtors are limited to the exemptions in Bankruptcy Code section 522(b)(3).[2] Section 522(b)(3) exempts (among other things) property exempt under state law and “retirement funds” held in a fund or account exempt under various Internal Revenue Code (IRC) sections, which include individual retirement accounts (IRAs) and qualified plans under the Employee Retirement Income Security Act (ERISA), such as 401(k) plans. Thus, in bankruptcy the initial owner’s IRAs and ERISA-qualified plan accounts are generally protected.[3]

Outside federal bankruptcy. If a creditor pursues the retirement account of an initial owner not in bankruptcy, the creditor will be similarly out of luck. The anti-alienation provisions of ERISA section 206(d) and IRC section 401(a)(13) prohibit creditors (with some exceptions) from reaching ERISA plan accounts.[4] In Tennessee, IRAs are exempt from any and all claims of the initial owner’s creditors (except the state of Tennessee) under Tenn. Code Ann. section 26-2-105(b).

After the initial owner dies, creditor protection for beneficiaries is uncertain.
Inherited IRAs. In Clark v. Rameker,[5] the U. S. Supreme Court held that inherited IRAs are not “retirement funds” for purposes of Bankruptcy Code section 522(b)(3)(C), because the inheritor, unlike the original owner, (1) may not contribute to the IRA, (2) must withdraw from the IRA annually regardless of age, and (3) may withdraw the entire IRA balance at any time without penalty. Therefore, inherited IRAs will be exempt in Tennessee only if they are exempt under state law that applies inside or outside bankruptcy.[6]

Tenn. Code Ann.  section 26-2-105(b) provides the following (emphasis added):

[Except for claims under a “qualified domestic relations order,”] any funds or other assets payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan which is qualified under §§ … 408 and 408A … of the Internal Revenue Code … are exempt from any and all claims of creditors of the participant or beneficiary, except the state of Tennessee. All records of the debtor concerning such plan and of the plan concerning the debtor’s participation in the plan, or interest in the plan, are exempt from the subpoena process.

This provision exempts traditional IRAs (IRC section 408) and Roth IRAs (IRC section 408A) from the claims of creditors of a participant or “beneficiary,” which is not defined. Does this mean an IRA beneficiary named by the initial owner? If yes, does this protection apply after the beneficiary inherits the IRA or only during the initial owner’s lifetime?

Contrast Tenn. Code Ann. section 26-2-111(1)(D), which provides that the assets of a “stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of death, age or length of service” (which includes IRAs) are not exempt under that section “if the debtor may, at the debtor’s option, accelerate payment so as to receive payment in a lump sum or in periodic payments over a period of sixty (60) months or less.”[7] Because the beneficiary of an IRA may withdraw the entire balance at any time (though required to recognize it as taxable income), an inherited IRA does not appear to be protected by that provision.

Regardless of one’s confidence in Tennessee’s state law protection of inherited IRAs, because beneficiaries move and because so few states explicitly exempt inherited IRAs, it is likely that a beneficiary’s interest in an inherited IRA will not be protected from creditors.

Inherited ERISA qualified plan accounts. The U. S. Supreme Court’s Clark rationale should mean inherited qualified plan accounts also are not “retirement accounts” for purposes of Bankruptcy Code section 522(b)(3)(C), for all the same reasons inherited IRAs are not.[8] However, ERISA’s anti-alienation provision might continue to protect an inherited ERISA account.

There are planning options to protect inherited retirement accounts from the beneficiaries’ creditors.
Given the uncertainty of creditor protection for inherited IRAs (and perhaps inherited ERISA accounts), lawyers need to look for ways to help clients plan for their retirement account beneficiaries. The following are a few options.

A surviving spouse should consider rolling over to her own IRA any IRAs inherited from her spouse. The Supreme Court did not speak to whether an IRA inherited by a spouse and rolled over or not rolled over to his or her own IRA is an inherited IRA for purposes of Bankruptcy Code section 522(b)(3)(C). Until we get guidance, an IRA in the survivor’s name looks less like an inherited IRA than an IRA left in the deceased spouse’s name.

A non-spouse beneficiary should consider not rolling over inherited qualified plan accounts into inherited IRAs. The Clark rationale likely undermines Bankruptcy Code section 522(b)(3)(C) protection for inherited ERISA accounts, but the ERISA anti-alienation provisions might continue to offer protection.

Name a spendthrift trust as the beneficiary of the retirement account. A basic estate planning strategy is to leave inheritance to a spendthrift trust that protects trust assets from the trust beneficiaries’ creditors. The retirement account owner can name a spendthrift trust as the beneficiary of a retirement account, but doing so requires carefully navigating complex tax rules if the owner wants to preserve “stretch out” of income tax benefits.

After the death of the initial account owner, the income tax benefits of traditional and Roth retirement accounts may be extended over the life expectancy of the beneficiary if the beneficiary is a “designated beneficiary.”[9] An individual can be a designated beneficiary, but a trust, estate, business entity or charity cannot.[10] However, “accumulation trusts” and “conduit trusts” allow “looking through” the trust to one or more trust beneficiaries as the designated beneficiaries, with stretch out of the tax benefits.

If an “accumulation trust” satisfies four requirements[11] for the beneficiaries of the trust to be considered designated beneficiaries, the life expectancy of the oldest current or “contingent” beneficiary (but not any mere “successor” beneficiary) will be used to determine the annual “required minimum distribution” (RMD) that must be withdrawn from the IRA by the trustee.[12] The advantage of an accumulation trust over a conduit trust is that any amounts withdrawn from the IRA may be accumulated in the trust or distributed to or for the beneficiaries, pursuant to the trust terms. The disadvantage is that it is not always clear, without precise drafting, which beneficiaries must be considered in determining the oldest.

A “conduit trust” allows the trust to use the life expectancy of someone other than the oldest beneficiary, provided the trust requires that the annual RMD, and any other amounts withdrawn from the IRA by the trustee, be distributed from the trust to the younger beneficiary (or perhaps used for the beneficiary’s immediate benefit). Because the beneficiary will receive all RMDs (calculated using the beneficiary’s life expectancy) and no one else will receive anything distributed from the IRA during the beneficiary’s lifetime, the IRA tax benefits may be stretched out over the beneficiary’s lifetime. The disadvantage of a conduit trust compared to an accumulation trust is that RMDs must be paid outright to the beneficiary (inappropriate in some situations) and no longer will be protected from creditors.

Use a Trusteed IRA. An alternative to using a separately drafted trust is a “trusteed IRA” or “IRA trust,” offered by some financial institutions and approved under tax law as an alternative to the more common custodial IRA. The trusteed IRA, if it includes spendthrift provisions, should provide the same creditor protection as a separately drafted spendthrift trust. The advantage of a trusteed IRA is that the trust form is provided by the financial institution, so no lawyer is needed to draft the trust. The disadvantage of a trusteed IRA is that the trust form is provided by the financial institution, so the financial institution must be the trustee and the client’s lawyers might be unable to craft personal and flexible provisions. A trusteed IRA is to a lawyer-drafted spendthrift trust what a Uniform Transfers to Minors Act custodial account is to a trust: cheaper to create, sufficient in some situations, and deficient in others.

Notes

  1. “Retirement Assets Total $24.2 Trillion in Third Quarter 2014,” Investment Company Institute (Feb. 26, 2:05 PM), http://www.ici.org/research/stats/retirement.
  2. Tenn. Code Ann. § 26-2-112.
  3. The amount of an IRA protected in bankruptcy is subject to a generous dollar limit under 522(n). Because a named beneficiary of an IRA or qualified plan account (other than a spouse for certain purposes) has no rights in the account until the owner dies, the account cannot be reached by the beneficiary’s creditors while the initial owner is living.
  4. 29 U.S.C. § 1056(d)(1), 26 U.S.C. § 401(a)(13). To the extent that Tenn. Code Ann. Section 26-2-111 (1)(D) addresses ERISA accounts, it is preempted by ERISA. In re Seller, 107 B.R. 152 (Bankr. E.D. Tenn 1989); see also ERISA § 514(a), 29 U.S.C. § 1144(a).
  5. Clark v. Rameker, 134 S.Ct. 2242 (2014).
  6. At least six states have explicitly exempted inherited IRAs from creditor claims. See Fla. Stat. § 222.21; Ohio Rev. Code § 2329.66; Mo. Rev. Stat. § 513.430; Alaska Stat. § 09.38.017; Tex. Prob. Code § 42.0021; N.C. Gen. Stat. § 1C-1601. In states that have not, many court cases, applying rationale similar to that in Clark, have found that inherited IRAs do not afford the same creditor protection as IRAs held by the initial owner.
  7. Tenn. Code Ann. § 26-2-111(1)(D).
  8. The issue is moot for some qualified plans, which require a lump sum or relatively short-term payout to beneficiaries. Any amounts distributed from a retirement account to an individual lose whatever creditor protection the account offered.
  9. IRC § 401(a)(9). Traditional IRAs allow pre-tax (tax-deductible) contributions and deferral of all income taxation until assets are withdrawn from the account, at which time the entire withdrawal is taxable. Roth IRAs are funded by after-tax (nondeductible) contributions, but all growth within the IRA is tax-free. Generally, the longer value can be left in the IRA with compounding growth, the greater the income tax benefits of the IRA. The same advantages are available under federal law for traditional and Roth 401(k) accounts, but, as noted above, some plans do not allow beneficiary stretch out. If the IRA owner dies before her required beginning date (April 1 of the calendar year following the calendar year of death) (RBD) and there is no designated beneficiary, then the entire balance of the IRA must be distributed no later than the end of the fifth calendar year after the year of the owner’s death. If the IRA owner dies before her RBD and there is a designated beneficiary, RMDs are based on the beneficiary’s life expectancy (all life expectancies determined under IRS tables). If the IRA owner dies on or after her RBD and there is no designated beneficiary, RMDs are based on the owner’s life expectancy (without regard to death). If the IRA owner dies on or after her RBD and there is a designated beneficiary, RMDs are based on longer of the owner’s life expectancy (without regard to death) and the beneficiary’s life expectancy.
  10. To avoid the owner’s estate being deemed a beneficiary of a revocable trust to which a retirement account is payable, the trust should include a provision prohibiting using retirement assets to pay any estate obligations (taxes, debts, expenses) after Sept. 30 of the year following the year of death (the date as of which the designated beneficiary determination is made).
  11. (1) The trust is valid under state law; (2) the trust is irrevocable or will become irrevocable upon the death of the IRA owner; (3) the trust beneficiaries who may benefit from the IRA are identifiable from the IRA beneficiary designation or the trust instrument; and (4) a copy of the trust or specified alternate documentation is given to the IRA plan administrator by Oct. 31 of the year following the year of the owner’s death. Treas. Reg. § 1.409(a)(9)-4(a)(5)(b).
  12. Treas. Reg. § 1.409(a)(9)-5, A-7.

 

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Tennessee Court of Appeals Reinforces Strict Will Execution Requirements

In a will contest case, HPS attorney Ed Smith represented two siblings who argued that their father’s will (which left them nothing) was not properly executed in accordance with the requirements of Tennessee law, because the witnesses to the will signed only the affidavit of attesting witnesses and not the will itself.  The Court of Appeals agreed and found the will invalid.  In re Estate of Bill Morris.  The case reinforces the Tennessee Supreme Court’s standard of strict compliance with the statutory requirements for the execution of a will.

 

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