In 2005 a Private Letter ruling was issued by the Internal Revenue Service approving a specially designed “IRA Trust” that offers maximum protection and flexibility while allowing the beneficiaries to “stretch” their shares of the IRA over their life expectancies.  The IRA Trust can also be used for employer provided retirement plans, such as 401(k)s, 403(b)s, 457 Plans, etc.

In most cases, an IRA owner designates a trust as the beneficiary of the IRA in order to have control over the disposition of the assets after he or she dies. The following are some reasons why an IRA owner may designate a trust as beneficiary:

  1. Spendthrift beneficiary protection – An IRA owner may be aware that a beneficiary is a spendthrift who may squander the inheritance. As such, the IRA owner may want the assets to be disbursed to the beneficiary according to a certain schedule instead of in a lump-sum payment. The IRA owner may also want some of the assets to be used for specific purposes, such as financing the beneficiary’s education. The IRA owner can ensure these conditions are met by designating a trust that includes the desired payment options. The trustee of the trust would then be responsible for complying with the trust provisions.
  2. Providing for children from a previous marriage – An IRA owner may want to ensure that his or her current spouse receive income from the assets and that the IRA owner’s children from any previous marriages receive their share of the assets. This can be accomplished by designating a trust that meets certain requirements, such as a qualified terminable interest property (QTIP) trust.

The Two Types of IRA Beneficiary Trusts

There are two types of trusts that can be utilized as an IRA beneficiary: the Conduit Trust and the Accumulation Trust. The IRS defines an Accumulation Trust as any type of trust that is not a Conduit Trust. With an Accumulation Trust, the trustee is not required to immediately distribute withdrawals from the IRA; the withdrawals can be held in the trust. The advantages of accumulating the distributions instead of paying them directly are: asset protection, substance or spendthrift issues, incentive distributions and further tax planning. One possible issue with this type of trust is that the life expectancy of the oldest beneficiary is used to calculate the required minimum required distributions (MRDs).

In order to ensure long term tax deferral, a “conduit” trust (rather than an accumulation trust) may be desirable in certain cases. Since a conduit trust has a single individual as a primary beneficiary, the trustee is required to take at least the MRD amount from an inherited IRA each year and pass that amount directly through to the trust beneficiary. With this conduit trust, the primary beneficiary’s life expectancy –not the original owner’s life expectancy – can be used to stretch MRDs over this younger life.

The disadvantage to the conduit trust is that distributions can’t be accumulated in the trust. They must be passed through to the trust beneficiary, who may spend the money or lose it to creditors. However, the IRA principal may still be protected.


The IRS strictly adheres to established regulations when they review and/or audit one’s estate. Therefore, expertise and great care must be exercised when planning for an asset that will be heavily relied upon by your family for future financial needs.

The rule for non-person beneficiaries also applies to trust beneficiaries, unless an exception applies, in which case the oldest underlying beneficiary of the trust is treated as the beneficiary of the IRA – for purposes of determining the distributions options. In general, the exception applies if the following requirements are met:

The trust is a valid trust under state law.

  1. The trust is irrevocable or will, by its terms, become irrevocable upon the death of the IRA owner.
  2. The beneficiaries of the trust are identifiable.
  3. A copy of the trust documents are provided to the IRA custodian by Oct 31 of the year immediately following the year in which the IRA owner died.


Designating a trust as the beneficiary of an IRA should be a solution to the IRA owner’s financial planning needs. However, steps must be taken to ensure that the designation does not create problems for the parties who will inherit the assets. An IRA owner should check with the IRA custodian to ensure that the provisions of the trust are acceptable to the IRA custodian and that they meet regulatory requirements. In addition, the IRA owner should consult with a competent attorney or estate planning professional for assistance in designing the trust. Here are some examples of circumstances that cause the trust to fail to satisfy the needs of the IRA owner:

  1. A copy of the trust is not provided to the IRA custodian by Oct 31 of the year following the year the IRA owner died, preventing the underlying beneficiary of an otherwise valid trust from using the life expectancy of the oldest identifiable beneficiary in calculating RMD amounts.
  2. The trust is eligible to disclaim the assets. If this happens, the other primary or contingent beneficiary usually inherits the assets, and the provisions of the trust no longer apply. This can be avoided by including a ‘disclaimer provision’ in the trust. In general, this provision may require that in the event the trust disclaims the assets, the disclaimed assets, instead of going to an individual, must be disposed according to certain provisions of the trust.
  3. The IRA custodian does not find the provisions of the trust acceptable, or the provisions of the trust conflict with the provisions of the IRA plan document. When designating a trust as the beneficiary of his or her IRA, the IRA owner should check with the IRA custodian to determine whether any provisions are unacceptable.


In short, designating a trust as the beneficiary of an IRA can be an effective estate-planning tool. However, it is effective only if all the parties involved – especially the IRA owner, the IRA custodian, the trustee of the trust and any attorneys representing the beneficiary – agree on the interpretation of the provisions of the trust and applicable laws. Conflicting interpretations could result in a delay of disposition of the assets and can be quite frustrating for those involved. Designing a trust is a complex process. The IRA owner should seek the assistance of a competent attorney and tax professional to determine if and when a trust is appropriate, the type of trust that suits the IRA owner’s needs and to ensure that estate planning needs are met and maximized.
What Sets The IRA Trust Apart From Other Designated Beneficiary Trusts?

The IRA Trust offers some unique post-mortem flexibility, which permits the trust to adapt to
the conditions existing at the time of the IRA owner’s/grantor’s death. If the beneficiary’s share
of the IRA Trust is a “Conduit,” trust, meaning that all of the IRA distributions flow over into the trust and then are immediately distributed out to the beneficiary, the beneficiary’s life expectancy can be used for stretch purposes. On the other hand, there are a number of estate planning reasons why we would prefer an “Accumulation” trust instead, where the IRA distributions that flow into the trust are distributed to the beneficiary only in the discretion of the trustee. Unfortunately, an Accumulation trust may cause the maximum stretch to be lost unless a whole number of requirements are met; if any monies accumulated in that trust could ever, at any time in the future, pass to someone older than the primary beneficiary, that older person’s shorter life expectancy must be used and there are even situations where no life expectancy can be used and the IRA will have to be distributed for and all the tax paid in five years. Since a discretionary trust is often designed for estate planning purposes to benefit individuals other than just the primary beneficiary, such as that beneficiary’s issues or others subject to the beneficiary’s power of appointment, and we want to take advantage of generation skipping for estate tax purposes, it may be very difficult for the estate planner, at the time of drafting the trust, to determine where to cut off future beneficiaries in order to balance the desire for stretch with the desire to fulfill the grantor’s dispositive intent. Also, it is difficult to determine at the outset whether or not a beneficiary’s trust would best be a Conduit or Accumulation trust, not knowing the circumstances of the beneficiary that will exist at the time of death, and the amount of protective features that will be appropriate for that beneficiary.

One of the unique features of the IRA Trust is a “toggle switch” which the Trust Protector can use, following the grantor’s death, to convert between a Conduit and Accumulation Trust, as is appropriate given the circumstances of the beneficiary and their need for protection. The Trust Protector, armed with this toggle switch, can also determine, for any beneficiary who will have an Accumulation trust, which secondary or contingent beneficiaries should be kept in or removed
in a way that best balances the primary beneficiary’s desire for stretch and fulfills the grantor’s
dispositive intent when that primary beneficiary passes away.

iStock_VeteransThe Department of Veterans Affairs offers numerous benefits for the families of deceased veterans. Most people think of widow’s pensions or other monthly benefits when they think of VA benefits. However, there are benefits that would be useful to families of deceased veterans or even veterans who currently planning for their final days. Also, as with most veteran benefits, knowing about a benefit is only half the battle – you must also know the correct form to fill out in order to apply for the benefit. Here are five benefits of which attorneys should inform their veteran clients:
1. Reimbursement of Expenses for Funeral and Plot – Form 21-530
The executor of a veteran’s estate can apply within two years of the veteran’s death for reimbursement for expenses related to the veteran’s funeral and burial plot. The estate of a veteran who dies because of an injury sustained during active duty can receive up to $2,000. Otherwise, the estate may receive up to $600. This probably won’t pay for the entire funeral, but every little bit helps.

2. Headstone or Marker – Form 40-1330
The family of a deceased veteran can apply for a headstone or marker from the VA. The headstone or marker is free, as is the shipping. The family does have to pay for the installation, though. However, the VA will inscribe endearments, such as “Beloved Husband and Father” on the headstone without cost.

3. American Flag – Form 21-2008
The families of veterans are also entitled to an American flag. The family may display it in a shadowbox or choose to have it laid to rest with the veteran. Either way, the VA will provide it free of charge.

4. Presidential Memorial Certificate – Form 40-0247
The family of a veteran may request a Presidential Memorial Certificate, which is signed by the President and thanks the veteran for his or her service to the nation. It’s a nice reminder of a thankful country.

5. Burial Plot
Not every veteran can be buried in Arlington National Cemetery, but veterans can be buried in other federal veteran cemeteries. If there is not a federal veteran cemetery nearby, there may be a veteran cemetery operated by the state. More information is available by contacting the Washington State Department of Veterans Affairs at 360-725-2152.

As with most benefits from the VA, in order to apply for them, the applicant must have a copy of the veteran’s discharge papers and a death certificate. A surviving family member can apply for a replacement copy of the discharge papers online at


If you’re a parent raising a child with a disability, your child’s health and comfort typically come first and foremost. But it’s just as important to prepare for your child’s financial future to help ensure a safe, secure and independent life ahead.

With more than 3.6 million U.S. children between the ages of 5 to 15 with a disability1, financial experts say it is crucial for many parents to recognize they can take a few simple steps now to help ensure security for their child in later years. In that light here is a set of guidelines – 10 questions and answers people should consider to help lay the groundwork for a secure financial future for their child with special needs.

When caring for a child with a disability, families often become so focused on day-to-day needs that they often lose sight of the larger financial issues that loom ahead. Clearly, many parents need to start early and take a long-term view when preparing financially for their child’s financial future, and we’ve assembled this checklist to help them get started.

Parents of children with special needs to ask themselves the following questions:

1. Am I getting the right advice? Since laws affecting people with disabilities change frequently and require specific expertise, it’s helpful to seek the expertise of a financial representative and an attorney who focus on estate planning for families with special needs children. Consider asking other parents for references or check with local advocacy groups, before embarking on your selection.

2. How should I develop an estate plan? Developing a detailed estate plan that best fits your family’s situation is essential to ensure your child’s long-term needs are met after you have passed away. Your estate plan – which can include wills, trusts, durable powers of attorney, health care proxies, and other documents – will outline how you would like your financial affairs handled and identify a guardian or guardians who will care for your child after you die. Consult an attorney and financial services professional who have a thorough understanding of your state’s disability laws to develop a comprehensive plan for the future.

3. What kind of government benefits is my family eligible for? Be sure you’re aware of any federal programs that may assist your family. Your child may be eligible for benefits under Medicaid, Medicare, or the Children with Special Health Care Needs (CSHCN) provision of the Social Security Act. Visit the Web sites for these entities to check eligibility requirements.

4. Am I making the right choices with my health plan? Raising a child with a disability means you may incur high health care costs, so it’s important to understand and maximize benefits under your health insurance coverage. Know which services and procedures are covered, which are not covered and how to appeal if a claim is denied. If you and your spouse both work, compare health plans and select the one that’s best for your child.

5. Have I communicated my life care plan to close family members and friends? While the generosity of friends and family members is welcomed, a well-meaning friend or relative may inadvertently disqualify your child for benefits if he or she gives a gift or bequest that exceeds state limits. Once your estate plan is complete, notify close friends and relatives of your life care plan. If your friends or relatives want to include your child in their wills, your attorney can assist.

6. What are the financial needs of my child’s guardians? When you name a guardian for your child, ask yourself: Would the guardian need additional income to care for your child if you died? Would special funding be required for home renovations, specially equipped vehicles or in-home health aides? Should you plan for childcare services if, for example, your guardian worked full-time? If the answer to any of these questions is “yes,” discuss these needs with your financial representative or attorney.

7. If I die unexpectedly, how will my child’s guardian know what to do? A letter of intent, written by you, would provide detailed information about your child and instructions to assist those who will care for your child upon your death. Information typically includes emergency contacts, medical history, preferred living arrangements, education or work arrangements, recreational preferences and behavioral challenges.

8. When should I apply for guardianship as my child becomes older? Many parents assume they will retain guardianship of their child, regardless of age. However, once your child reaches age of majority (typically at age 18 or 21, depending in which state you live), you must file for legal guardianship. In many cases, the guardianship process is merely a formality. But it’s important to remember that guardianship is a court appointed procedure.

9. Where do I want my child to live in the future? When your child reaches adulthood, he or she will have the option of living in an apartment, house, condo, or an assisted-living environment. Whatever option is chosen, it’s important to begin thinking about this when your child is still young, as early as 10 or 11. Waiting times for placements in assisted living facilities can be as long as 10 years for the best facilities. If your child wants to live independently, he or she will need the financial resources and money management skills to do so.

10. What other long-term issues do I need to consider? While housing is a primary long-term issue, there are a number of other matters that must be addressed, including: education, work opportunities, recreational programs, lifestyle, daily transportation, medical costs and custodial care. Projections for each of these factors should be accounted for when determining your child’s financial needs in your child’s life care plan.


After the U.S. Supreme Court decision in United States v. Windsor last year extended fundamental federal rights exercised by married couples to same-sex couples, many states subsequently legalized same-sex marriage, but there are still a number of States that do not allow the recognition of same-sex marriage. Couples married in states where same-sex marriage is legal, but who reside in states that do not often operate under the false assumption that they are protected as a married couple for all purposes; however, they need to execute a proper estate plan via six key areas to protect their interests.




Wills serve as the foundation of practically every estate plan. They save time and permit the direction of assets to friends and family, avoiding reliance upon the strict intestacy laws. The only difference for same-sex couples (in states where marriage still isn’t legal) is that they must execute a will in order for their partners to receive anything. In states that do not recognize the marriage, the state treats the parties as single individuals when it comes to intestacy. Intestacy involves more parties, prolongs the distribution process, and generally costs more than probating a will that outlines the wishes of the deceased.


Powers of attorney


Financial durable powers of attorney and medical powers of attorney serve as the next layer of estate planning. These documents allow for the same-sex partner to make decisions on the other’s behalf. In states that do not recognize a couple as married, the hospital cannot look to the partner for medical decisions without a power of attorney. Powers of attorney are key factors to provide the partner with full decision-making abilities for the other individual.


Directives to physicians


Directives to physicians serve in the same capacity for any individual. They allow for the executor to explicitly state the decisions to be made and the treatments to be implemented. These directions give the decision-maker a peace of mind that he or she is following the wishes of the incapacitated person, and they give the decision-maker documentation to support any challenges to the decisions made.


Disposition of remains

Similar to directives to physicians, the disposition of remains identifies the wishes of the executor. The individual can outline what he or she wants to happen upon death and designate who will be in charge of the process.


Cohabitation agreements


Cohabitation agreements set apart same-sex estate planning and unmarried estate planning from planning for married couples. Similar to premarital agreements, a cohabitation agreement outlines how the parties divide their assets and debts in case of a break up or division of the joint estate. The agreement specifies who holds what percentage interest in accounts, furniture, real property and other items. It also identifies which individual takes pets and other items with strong personal attachment.


Cohabitation agreements serve a valuable purpose in forcing the couple to outline the structure of the relationship. Some may choose to specify that they share everything 50/50; however, once it is in writing, then they cannot argue that it was not their intent or understanding. Like the premarital agreement, many couples view a cohabitation agreement as something to ease the minds of their family members and not a document planning for destruction of the relationship.


Many argue that cohabitation agreements only set the relationship up for failure since the couple enters the relationship planning for its demise. This is not the case. The majority of premarital agreements arise to set the parties’ family members at ease, and cohabitation agreements play a similar role. They not only identify division upon break up; they also describe the relationship in more specific terms. When one party writes a will and leaves “all interest” in assets, the cohabitation agreement defines what constitutes “all interest.” It aids the family in understanding the relationship and tells the family that their loved one understands what is going on and what commitments the individual made.


Retirement plans and life insurance policies


Keep in mind that if you do not designate a beneficiary on retirement plans and life insurance, the proceeds from the plan or policy become part of the estate. Sometimes this is the desired result, but it often causes problems. Best practice is to carefully review you beneficiaries to be sure they are correct. It is a simple check, but life insurance and retirement plans are a central part to most people’s estate planning and often represent the largest assets in your estate.

Finally, remember to review your estate planning documents periodically (every two to three years) as many relationships change over time, and the desired distribution evolves with the changing relationships.


Keep your originals in a fire-proof safe and give the code to your executor or a trusted friend. If you wish to keep your will in a safety deposit box, make sure another individual has access to the safety deposit box in order to retrieve your will. This saves time when it comes to retrieving the documents when they are needed.

What is Estate Planning?

This blog post is brought to you by the Estate Planning Resource Center,

In essence, Estate Planning concerns the establishment or continuation of a tradition.

In old Roman law, “traditio” meant a way of transferring the ownership of private property.  This tradition involves the accumulation, conservation and distribution of assets.

Your “estate” is both the real and personal property which you own, and your stance toward that property.

Proper Estate Planning is much more than mass producing Wills and probating estates. Estate Planning is a process in which thought is required, so that you have documents that accurately reflect what your goals are, and, when the time comes to use them, actually do accomplish those goals.

Whether it is merely the use of Wills and community property agreements, or more sophisticated planning techniques, proper Estate Planning fulfills these basic goals:

Here is what I want to accomplish: I want to be the one in control of my estate as long as I am able. If I ever become unable to manage my estate, I want to be the one who designates the person to manage my estate for me, without court intervention.  Following my death, I want things to be as easy on my loved ones as possible.  I want my estate to pass to the people and organizations that I designate, in the way I want.  I want to avoid conflict over the administration of my estate, and, finally, I want there to be an absolute minimum of estate taxes, delays, court costs and attorney fees possible in the process.

A proper Estate Plan, then, is something very personal, and no two plans will be exactly the same for any two people.  A proper Estate Plan should be focused on you and your goals, ambitions, hopes and circumstances.

Welcome to our blog!  Our resource center has just opened its doors, and our intention is very simple:  To make you, the estate planning consumer, an educated consumer.  To provide an unbiased resource for you to gather information, stay informed, learn more, and make wise choices, so that you have put together an estate plan that accomplishes your goals.

Every article and workshop on our site were created by estate planning attorneys, so every effort will be made to provide accurate and timely information.  Whether you are in the process of planning your estate, or whether you are an advisor who helps clients in this area, it is our intention to provide the very best information possible.

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