The Top Five Things Practitioners Need to Know About IRAs Now; A Discussion of State Law, Case Law, and Other Considerations
Individual retirement accounts (IRAs) are most often thought of as tax-deferred accounts that the government conjured up in the 1980s to encourage Americans to save for retirement. With almost $10 trillion in tax-deferred retirement accounts, $2.5 trillion of which is estimated to be held in IRAs, they have become an estate and tax planning force to be reckoned with.1 According to the Employee Benefits Research Institute, over 90 percent of all households in America have some sort of financial account, and of those households surveyed, retirement accounts were second in popularity only to transactional accounts such as checking and savings accounts.2 It is important to recognize the significance of these accounts and perhaps examine some of the nuances that prevent them from being just another product of the Internal Revenue Code, since it is likely under current tax law that a generous portion of the approximate $7.5 trillion that are in non-IRA retirement accounts will eventually be rolled into IRAs at some point in the future.
It is also important to recognize that every state has enacted laws that touch the world of IRA administration, that must be considered together with case law that sometimes seems to have little to do with statutes or the Internal Revenue Code. Additionally, each IRA trustee and custodian may also limit the options available to the IRA owner or beneficiary by contract. Sometimes the interaction of all of these elements can have a surprising impact on the ultimate disposition of these accounts. The focus of this article is to raise awareness of some of these elements and point out the pitfalls they present to the unwary.
Basic Goals and Challenges of Planning with IRAs
It is imperative to understand the basic rules and goals of IRAs before discussing their nuances. IRAs have always presented special estate planning challenges due to ownership restrictions. An IRA owner cannot give the IRA away intact during his or her lifetime. This has traditionally made it difficult to properly plan for use of the unified credit because the IRA can only be used to equalize the taxable estates between spouses when the IRA owner dies. The Internal Revenue Service released new proposed Treasury regulations on January 12, 2001, and new final IRA regulations on April 16, 20023 (IRA rules), simplifying administration during the IRA owner’s lifetime and providing new postmortem planning opportunities. With these new opportunities come an equal number of new challenges.
One must be mindful that IRAs are not taxable until monies are distributed to a beneficiary, at which time the distribution is taxed as ordinary income at the beneficiary’s tax rate. The length of income tax deferral available depends on whether a beneficiary is named, and who is considered a “designated” beneficiary under the new IRA rules. This could be either an individual or a trust that is both valid under state law and is irrevocable by its own terms upon the IRA owner’s death. The beneficiary must be named on the beneficiary designation form to be considered “designated.” Under the new IRA rules, the post-death distribution period is based on the life expectancy of the designated beneficiary or beneficiaries (if there are separate shares) that remain as of September 30 of the year after the calendar year of the IRA owner’s death. With the best-laid plans, a nonspouse beneficiary can look forward to taking IRA distributions over his or her own life expectancy. If no beneficiary has been named, the estate is named, or if there are multiple beneficiaries and one is not an individual, the IRA will be deemed to have no designated beneficiary. Death of the IRA owner after the required beginning date (RBD) without a designated beneficiary will result in deferral based on the remaining single nonrecalculated life expectancy of the decedent.4 If the death occurred prior to the IRA owner’s RBD and there was no designated beneficiary, distribution must be made by December 31 of the calendar year containing the fifth anniversary of the decedent’s date of death. This certainly curtails the benefits of tax-deferred growth that might have otherwise been available.
Spouses receive special treatment under the tax code and are the only beneficiaries that can inherit IRAs or qualified plan assets and actually roll them over, or simply change the name on the account to their own. In an ideal world, having a spouse beneficiary can result in significant tax benefits because when a spouse rolls over assets, all future distribution dates revolve around the surviving spouse’s date of birth, rather than that of the deceased IRA owner. These assets are subject to an unlimited marital deduction for estate tax purposes but more importantly, if the surviving spouse is younger than the decedent, there will also be a substantial opportunity for deferral of income taxes.
Also contained in the preamble of the new final regulations under the heading “Explanation of Provisions” is the following:
The period between death and the beneficiary determination date is a period during which beneficiaries can be eliminated but not replaced with a beneficiary not designated under the plan as of the date of death. In order for an individual to be a designated beneficiary, any beneficiary must be designated under the plan or named by the employee as of the date of death.
This refers to the new postmortem planning opportunities that arise through the ability to disclaim, distribute, or divide the assets. A disclaimer of assets must be done in compliance with IRC §2518 as well as state statute, and must generally be done within nine months of the decedent’s date of death; this is not extended to the September 30 beneficiary determination deadline. Distribution must be made prior to September 30 to any beneficiary that is not a designated beneficiary in order to preserve the deferral options of the designated beneficiaries. Finally, accounts may be divided at any time after the IRA owner’s death but must be divided by the December 31 deadline in order to receive separate share treatment.
If the Internal Revenue Code were the only consideration in IRA planning, the new final rules would be simpler than the prior rules, and planning with these accounts would not present such a challenge. However, as you will see in the ensuing discussion, there are many issues unrelated to the Internal Revenue Code that can play an integral role in the outcome of the IRA. This article presents many of these issues for your consideration but will focus primarily on case law, statutory law and concerns for Florida residents and their advisors.
1) Be Aware of State Statutes Affecting IRAs
Most states have a number of statutes that impact IRAs and, while the following is not meant to be an exhaustive list of all relevant statutes, it is a starting point. It is important that practitioners are aware of the relevant statutory scheme when planning with IRAs.
The Elective Share: Florida’s new augmented elective share statute became effective on October 1, 2001. IRAs and qualified plans now fall under the second tier of the three-tier priority system imposed by statute.5 A surviving spouse who is unhappy with his or her share of the decedent’s estate can now elect 30 percent of the augmented estate, including IRAs. The window for filing for the elective share is the earlier of six months from receipt of notice of administration or two years from the date of death of the decedent.6 This date is significant in light of the September 30 deadline for IRA beneficiary determination. Furthermore, new proposed treasury regulations §1.401(a)(9)-4, A-1 specifically state that “the fact that an employee’s interest under the plan passes to a certain individual under applicable state law does not make that individual a designated beneficiary unless the individual is designated as a beneficiary under the plan.” It remains unclear under the new IRA rules whether a spouse who is not listed on the beneficiary form will be afforded the same leeway as in the past. Furthermore, it is possible that in the event of an elective share challenge, maximum income tax deferral could be lost not only for the surviving spouse but for the other designated beneficiaries on the account. This issue may be overcome with the use of disclaimers, valid prenuptial or postnuptial agreements or spousal waivers.
Guardianship Laws: Many practitioners welcome the opportunity to name a child or grandchild as beneficiary of an IRA because, when designated properly, this will maximize the deferral opportunity available. A grandchild who is age five at the time of the IRA owner’s death will have a life expectancy of approximately 78 years,7 which is a great planning opportunity; however, don’t overlook the fact that under F.S. §744.301(2), a natural guardian or parent may only manage or dispose of proceeds from an inheritance not exceeding $15,000. Currently, this would include IRAs if the amount of the IRA inherited exceeds $15,000. This can be overcome by the proper use of a trust for the minor.
Additionally, Florida guardianship law requires that if the IRA owner becomes incapacitated, the court may need to establish a guardianship. If the IRA owner is out of state but the IRA account is housed within the State of Florida, a foreign guardian may need to appoint a resident agent.8 This may be avoided with a properly drafted power of attorney.
Probate Law: IRAs are exempt from the claims of creditors pursuant to F.S. §222.21 and are not subject to probate unlessthe estate of the decedent is the beneficiary of the estate. When an estate is the IRA beneficiary, maximum tax deferral opportunities are lost. In a world where asset protection has become so important, protecting the exempt status of IRAs should be given utmost consideration. This can be avoided by designating a valid beneficiary, not only for IRA owners, but also beneficiaries of inherited IRAs on forms provided by the IRA trustee or custodian.
Uniform Principal and Income Act: F.S. §738.602 now clarifies how distributions from IRAs and qualified plans will be treated for purposes of trust accounting income. Planners must keep in mind that the distribution itself is still subject to income tax regardless of whether it is categorized as trust account income or principal, but the characterization of the distribution may determine whether it passes out to the beneficiary or is taxed within the trust at the higher trust tax rate.
Community Property Law: Florida is not a community property state, but many of our residents have moved here from community property states. There are currently nine states that offer community property status. These states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Planners should consider and evaluate an IRA owner’s prior residence in any of the above states before naming someone other than the spouse as the IRA beneficiary.
State Estate and Income Tax: Although Florida does not have state income tax and will not even have a “pickup” or “sponge” death tax for much longer, many IRA owners within this state are subject to taxes in other states. It will be especially important, going forward, to be certain to take any potential state death tax liability into account when planning.
2) Be Aware of Case Law Regarding IRAs
IRAs are most often litigated within the context of three basic types of cases: divorce, bankruptcy, and estate settlement. The primary focus of this article is on tax and estate planning considerations; therefore, we will not address the bankruptcy issues as that could easily render enough material for a separate article. However, it is important to know what precedent exists within the divorce and estate settlement arenas.
Division in Divorce: F.S. §61.075 requires equitable distribution in the event of divorce. IRAs and qualified plan assets are considered to be marital assets to the extent that the assets were acquired or enhanced during the marriage. Qualified plans are divided by way of a qualified domestic relations order (QDRO); however, it is significant to note that for the division of an IRA to be a nontaxable event, the court must so order and the language of the order and/or property settlement must clearly state that the monies being distributed from the IRA in the name of spouse A are to be rolled or transferred into an IRA in the name of spouse B. This is critical because, if the court order only states “spouse A is to pay spouse B $$$ funds from spouse A’s IRA,” spouse A will be liable for the income tax on the money and potentially any penalties if spouse A is not 59 ½ years of age yet, and spouse B may lose tax-deferred growth.
Disposition of IRA after Divorce: Another common mistake resulting in a proliferation of case law is failure to change the beneficiary of the IRA to reflect the divorce of the parties. The leading case in regard to this issue is Cooper v. Muccitelli, 661 So. 2d 52 (Fla. 2d DCA 1995), a case involving life insurance proceeds. The spouses had divorced and then the husband died without changing his beneficiary designation to remove his former spouse. The appellate court certified a question to the Florida Supreme Court regarding the court’s holding that, without specific reference in a property settlement to life insurance proceeds, the beneficiary of the proceeds is determined by looking only to the insurance contract. The Florida Supreme Court examined the dissolution terms as well as the insurance documentation. It determined that the husband was free to name anyone he liked as beneficiary of the insurance policy and that the instructions were clear as to how to accomplish a change. He did not take any steps to effectuate a change prior to his death and, therefore, the former spouse remained as the beneficiary. The court said, “The analysis that the general language in the separation agreement trumps the specific language in the policy would place the insurance carrier in an impossible position—the carrier could never be certain whom to pay in such a situation without going to court, in spite of what the policy said or how clearly it was worded.”9
The parties may avoid this situation with specific language in the separation agreement10 or by having the IRA owner execute a new beneficiary designation. The Florida statutes concerning revocable trusts and wills in light of divorce11 do not govern any account whose disposition is determined by a beneficiary designation and therefore will not automatically cause the surviving former spouse to be treated as having predeceased the decedent.
Most states follow the same logic as the state of Florida.12 One case of particular interest is PaineWebber, Inc. v. East, 768 A.2d 1029 (Md. 2001). This case concerned a former wife who brought suit against the former husband’s estate, the trustee of the former husband’s IRA, and the surviving spouse of the former husband to recover IRA proceeds as his named beneficiary. The interesting twist in this case is that the PaineWebber IRA agreement had been updated, as is required by the IRS when there are changes in the law, and the new agreement left the beneficiary designation blank. The only signed form designating a beneficiary was a prior agreement naming the former wife. The Maryland Supreme Court chose to award the IRA to the former spouse as they found there was no evidence to show that the prior beneficiary designation had been revoked. Though extreme, this opinion illustrates the importance of properly designating spousal beneficiaries.
Estate Settlement: Estates that include IRAs as assets have the same types of issues as estates that do not include IRAs. There are often disputes over who is entitled to the IRA. The only thing that makes IRAs different is that, usually, the beneficiary designation form will control over a will. There are many cases in Florida relating to IRAs and estate settlement, some examples of which follow below.
Adoption and Estate Settlement: In Leonard v. Crocker, 661 So. 2d 1244 (Fla. 3d DCA 1995), the personal representative of the estate brought suit seeking to recover proceeds of an IRA, alleging that the designation of the decedent’s child as beneficiary lapsed upon the child’s subsequent adoption. The circuit court in Dade County awarded the account proceeds to the subsequently adopted child. The personal representative appealed. The district court of appeal held that the designation that identified the IRA beneficiary by birth date and Social Security number did not lapse upon the beneficiary’s subsequent adoption and name change.
Doctrine of Cy Pres and Estate Settlement: It is beneficial to name a charity as beneficiary of an IRA, as the charity is the only entity that can take receipt of IRA assets and not pay income tax, and the estate will receive a deduction for the full amount of the charitable gift. However, sometimes even charitable bequests have problems. Alzheimer’s Case, 747 N.E.2d 843 (Ohio 1st Dist. 2000), is an Ohio case in which the decedent left one fifth of his IRA to “Alzheimer’s Disease Research.” The custodian of the IRA filed a complaint with the probate court seeking a declaratory judgment. The decedent had previously gifted monies to several different Alzheimer’s organizations locally. Applying the cy pres doctrine, which allows an equitable substitution if the original charitable purpose has become impossible, inexpedient, or impracticable to fulfill, the court ordered that each of three charities that were a party to the action receive one third of the monies designated for “Alzheimer’s Disease Research.”
Will versus Intent versus Beneficiary Designation and Estate Settlement: There are many cases, both in Florida and across the country, arising from conflicting testamentary provisions. Generally, IRAs are treated as pay-on-death accounts and are governed by the beneficiary designation rather than by will or probate.13Most cases hinge on whether there were specific steps required by the trustee or custodian to effect a change of beneficiary, whether they were followed, and whether there was intent and substantial compliance.14 In the case of In re Estate of Golas, 751 A.2d 229 (Pa. Super. 2000),15 the decedent was a cancer patient and made numerous attempts to change his beneficiary designation to reflect his sister prior to his death. He died while waiting for the change of beneficiary form, but had made his intent clear to his attorney as well as two brokers. The court found that there was sufficient intent and substantial compliance on the part of the decedent and awarded the IRA to the sister. It is unclear what impact this outcome may have had on the tax deferral retained by the IRA.
Surviving Spouses and Estate Settlement: Sometimes spouses are surprised to learn that they are not the beneficiaries of the IRA upon the death of the IRA owner, and there is no duty to the spouse to inform them if the IRA owner makes a change.16 There are no reported cases involving IRAs and Florida’s elective share as of yet, but there are numerous cases elsewhere dealing with surviving spouses and contests over IRAs. There are several cases involving IRAs and elective share issues in other states. In Briggs v. Hemstreet-Briggs, 701 N.Y.S.2d 178 (N.Y.A.D. 3 Dept. 2000),17 the petitioning spouse’s position is counter-intuitive because the spouse inherited several IRAs from her husband and failed to disclose them to the court to be included in the calculation of her elective share. The court punished the surviving spouse for her lack of candor by awarding the IRA to the estate. While this appears to be a just result, once again it is unclear what tax consequences this decision may have had in regard to the tax-deferred status of the IRA.
Miscellaneous Issues and Estate Settlement: There are too many categories to be able to include all types of settlement cases but here are some points of interest. In re Estate of Branovacki 723 N.Y.S. 2d 575 (N.Y.A.D. 4 Dept. 2000), is a New York case dealing with undue influence regarding a change of beneficiary. Johnston v. Estate of Wheeler, 245 A.2d 345 (D.D.C. 2000), is a District of Columbia case where the court determined that a rollover of qualified plan assets into an IRA by the decedent prior to death did not constitute ademption under the probate code. There are many cases on state death tax and IRAs,18 as well as cases on apportionment of estate taxes between probate and nonprobate assets.19 Finally, there are a growing number of malpractice and third party beneficiary cases.20
3) Trusts May Be Worth the Trouble
There are many good reasons for naming a trust as an IRA beneficiary; avoidance of guardianship, use of the credit shelter, and control of the disposition of assets after the IRA owner’s death. The trick with using a trust in this fashion is to be able to do so without sacrificing tax deferral opportunities. To preserve tax deferral options, it is important that the trust qualify for “look through” treatment, which means the life expectancy of the oldest beneficiary of the trust can be used for distribution purposes.21 In order to use separate life expectancies for separate subtrusts and qualify for separate share treatment under the final IRA rules, two requirements must be met: 1) the interests of the beneficiaries must be expressed as fractional or percentage interests as of the date of death of the IRA owner; and 2) separate accounts must be established by December 31 of the year after the IRA owner’s death. Without separate share treatment, the trust will be limited to using the life expectancy of the oldest beneficiary. This may be a trap for the unwary if the goal was to pay the IRA assets to separate subtrusts over the underlying beneficiary’s life expectancy.
The IRS has issued conflicting private letter rulings (PLRs) on the use of trusts. Although PLRs cannot be used as precedent unless your client has the exact same facts and circumstances as the taxpayer in the PLR,22 they are a helpful tool in the interpretation of IRS issues. The same month that the final regulations were issued, so was PLR 200234074. In this PLR, the IRA was payable to a trust. The trust was divided into two subtrusts. Subtrust A was payable to the surviving spouse outright. Subtrust B provided for lifetime income to the surviving spouse, with the remainder paid outright and equally to three beneficiaries (the IRA owner’s children). The trustee of the trust then split the IRA into four separate inherited IRAs (one for subtrust A and three for the children). At the time, the IRS ruled that each child could use his or her own life expectancy, as subtrust B was viewed as a “look-through” trust. The final regulations followed this PLR.
The next series of PLRs on this issue resulted in completely different rulings. The facts set forth in PLRs 200317041, 200317043, and 200317044 are eerily similar to those in PLR 200234074. In all three cases, the IRA was payable to a trust upon the death of the IRA owner. In each case, that trust was payable equally to the owner’s children, with no discretion in regard to the amount of the share each child would receive. In all three cases the IRS denied separate share treatment. The IRS position seems to hinge on a new sentence in the final regulations in Treas. Reg. §1.401(a) (9)-4, A-5(c). It reads, in part, “[T]he separate account rules under A-2 of §1.401(a) (9)-8 are not available to beneficiaries of a trust with respect to the trust’s interest in the employee’s benefit.” In effect, the new position of the IRS is to “look no further than the beneficiary form,” much like the policy has been on estates. It is clear from the regulations that a trust is considered to be a designated beneficiary if it meets the requirements we have already discussed earlier in this article. The IRS’s new position appears to be that, as a designated beneficiary, the trust has a life expectancy of its own and that life expectancy is based on the life expectancy of the oldest beneficiary of the trust, regardless of any subtrusts created within the trust.
Although this interpretation is troubling and certainly not what the professional community was lead to believe would be the IRS’s position in the final regulations, it is not a complete disaster; however, it does require some creative drafting. First, be sure to designate subtrusts specifically on the beneficiary form. Do not make the IRA payable to the master trust, but, rather, list specific subtrusts and the percentage or fraction that each subtrust will inherit. Second, plan for contingencies and leave an exit strategy. If the plan is to leave the IRA to a trust with income for life to the surviving spouse and then to the children, specify, “If my spouse survives me, I designate the John Smith Trust as beneficiary of my IRA. If my spouse does not survive me, then I designate my children as beneficiaries of my IRA in equal shares” on the beneficiary form. Third, allow for disclaimers. The specific endorsement of the use of qualified disclaimers to determine designated beneficiaries by the IRS is a gift of sorts. Fourth, designate as many layers of contingent beneficiaries as possible. doing so, it may be possible to update an outdated beneficiary form postmortem by use of qualified disclaimers, and still achieve the desired result. Finally, be aware of the contingent beneficiaries of any trust named on the beneficiary designation. A result similar to that in PLR 200252097 should be avoided. The trust in question contained language that made it possible for someone older than the primary beneficiary to ultimately inherit the IRA proceeds. This being the case, the IRS ruled that the older contingent beneficiary’s life expectancy had to be taken into account. To avoid this potential pitfall until the IRS clarifies its position, be sure that the benefits of any subtrust named directly as an IRA beneficiary will not revert to someone older than the beneficiary whose life expectancy you want to be able to use, or that the trust will be treated as a conduit trust, which requires current distribution of RMDs to the beneficiary.
4) Estate Beneficiaries Are Not the End of the World
As discussed earlier, estates are not considered designated beneficiaries. Even so, there is good news within the final regulations. Under the new rules, an estate may use the remaining single nonrecalculated life expectancy of the IRA owner if the IRA owner died after attaining age 70 ½. The old rule was that the IRA had to be distributed by December 31 of the year after the IRA owner’s death. This new rule means that even if some disaster occurs where disclaimers and distributions will not work to fix an undesirable beneficiary designation (or perhaps no designation at all), there is still some time available for deferral. For an IRA owner age 70 at the time of death, this could mean income tax deferral for the estate of 16 or 17 years, a burdensome period for the maintenance of an open estate. Be aware that PLR 200013041 concluded that when the trust that was the beneficiary of the IRA terminated, the trust could distribute shares of the IRA to the subsequent beneficiaries and there would be no change in the tax status of these accounts. The new accounts were funded as a result of the trustee assigning the interests in the IRA to the subsequent beneficiaries and trustee to trustee transfers being executed. The IRAs were set up in the name of the decedent for benefit of (FBO) the trust beneficiaries. There was no additional deferral or acceleration of tax liability but rather the remaining nonrecalculated life expectancy of the IRA owner. Likewise, PLR 200234019 reflects the same result with regard to estates. Also, be aware that although the IRS will most likely allow these transfers without any tax implications, it is sometimes difficult to find an IRA trustee or custodian who is willing to divide the IRA and allow continued deferral.
5) Read the IRA Agreement
Despite their peculiarities, IRAs are, in their simplest form, trusts.23 Property is required to be held by one party for the benefit of another. More than that, an IRA agreement is also a contract with the financial institution that is providing the custodial or trustee relationship. Many times IRA owners do not bother to read the fine print on these agreements and may be surprised by the terms to which they have agreed.24
All IRA agreements must be approved by the IRS prior to use to ensure that the arrangement will qualify as an IRA under the Internal Revenue Code. Beyond the basic language that is required, custodians and trustees have the right to include language for their own business purposes. Such language will often include a clause mandating arbitration or mediation of claims. Often, these agreements will also include default provisions in regard to the disposition of the IRA upon the owner’s death. It is important to know whether the document provides for distributions between beneficiaries to be “per stirpes” or “per capita.” Many of the older documents had a default provision of “per capita,” meaning that if the IRA owner died and left funds to three children, and one of the three children predeceased the IRA owner, the funds would be payable to the surviving two children rather than to the heirs of the deceased child. This is not usually the desired result.
Many older documents also have a default regarding who the IRA is payable to in the event that no beneficiary is named. Most financial institutions have a default of the IRA owner’s estate, but some have chosen to make the default the IRA owner’s surviving spouse. Some institutions will allow a beneficiary of an inherited IRA to name their own beneficiaries, as permitted by the IRS. Others do not allow this, which results in the inherited IRA being payable to the estate of the beneficiary in the event that the beneficiary deceases prior to complete payout of the account. As a result, an otherwise nonprobate asset would be subject to probate. Finally, some documents actually limit the payout options available to estates and require that, if the estate is the beneficiary, the account must be paid out within one year.
It is imperative for the IRA owner and their professional team to periodically review the IRA agreements that govern their accounts. Agreements must be amended periodically by the institution to comply with changes in the Internal Revenue Code. Often when these amendments are made, these new default provisions are incorporated. It is equally important to keep copies of all beneficiary designations. In a financial world that is trying to go paperless, it is common for original beneficiary forms to be scanned or microfiched, and sometimes the copies are illegible and institutions are unable to locate the originals. It is imperative that copies of these forms be kept with other important estate planning documents, because a beneficiary designation holds more weight in Florida courts than a will.
Conclusion
It is up to all practitioners in the area of IRA administration, estate planning, and retirement planning to be aware of all of these idiosyncrasies and to stay as well-informed as possible. Awareness of the legal and business environment in which IRAs exist is essential to help our clients avoid costly mistakes and unexpected outcomes. q
1 www.ebri.org/facts/1203fact.pdf.
2 www.ebri.org/facts/0403fact.pdf.
3 The new proposed and final treasury regulations are included in §1.401(a)(9)-0; §1.401(a)(9)-8; §1.403(b)-2; §1.408-8; and §54.4974-2.
4 Prop. Treas. Reg. §1.401(a)(9)-4, A-3 (b) and Treas. Reg. §1.401(a)(9)-5, A-5(c)(3).
5 Fla. Stat. §732.2075(1), (2).
6 Fla. Stat. §732.2135(1) & (2).
7 Department of the Treasury, Internal Revenue Service, Publication 590, Appendix C Life Expectancy Tables; Table 1 (Single Life Expectancy) (For Use by Beneficiaries).
8 Fla. Stat. §744.307(2).
9 Cooper v. Muccitelli, 682 So. 2d 77, 79 (Fla. 1996).
10 See also Vaughan v. Vaughan,741 So. 2d 1221 (Fla. 2d D.C.A. 1999); In re Estate of Dellinger, 760 So. 2d 1016 (Fla. 4th D.C.A. 2000); Luszcz v. Lavoie, 787 So. 2d 245 (Fla. 2d D.C.A. 2001).
11 Fla. Stat. §§737.106 and 732.507.
12 See also Schultz v. Schultz, 591 N.W. 2d 212 (Iowa 1999); Pinkard v. Confederation Life Insurance Company, 647 N.W. 2d 85 (Neb. 2002).
13 31 Am. Jur. 2d Executors and Administrators §502 (1989).
14 See Goter v. Brown, 682 So. 2d 155 (Fla. 4th D.C.A. 1996); Bielat v. Bielat, 721 N.E. 2d 28 (Ohio 2000); In re Estate of McIntosh, 733 A. 2d 649 (N.H. 2001); In re Estate of Gloege, 649 N.W. 2d 468 (Minn. App. 2002).
15 See also In re Estate of McIntosh, 773 A. 2d 649 (N.H., 2001); In re Estate of Eastman, 760 A.2d 16 (Pa. Super.
2000).
16 Anton v. Merrill Lynch, 36 S.W. 3d 251 (Tex. App.-Austin, 2001).
17 See also Caine v. Freier, 564 S.E. 2d 122 (Va. 2002); McInnis v. McInnis, 560 S.E. 2d 632 (S.C. App. 2002).
18 See In re Estate of Roberts, 762 N.E. 2d 1001(Ohio 2002); In re Estate of Rosenberg, 2001 WL 1155804 (Ohio App. 6 Dist. 2001); Carlin v. Director, New Jersey Div. of Taxation, 19 N.J. Tax 545 (N.J. Tax 2001).
19 Peterson v. Mayse, 993 S.W.2d 217 (Tex. App.-Tyler 1999).
20 See Simonelli v. Chiarolanza, 810 A.2d 604 (N.J. Super. A.D. 2002); Holtz v. J.J.B. Hilliard W.L.Lyons, Inc., 185 F. 3d 731 (IN. C.A. 7 1999); Johnson v. Wiegers, 46 P.3d 563 (Kan. App. 2002); Powers v. Hayes, 776 A.2d 374 (Vt. 2001); Lavitt v. Meisler, WL 21771728 (Conn. Super. 2003).
21 Treas. Reg. §§1.401(a)(9)-4 A-5 and 1.401(a)(9)-5 A-7.
22 Treas. Reg. §601.201(1)(1).
23 McCarty v. State Bank of Fredonia, 795 P.2d 940 (Kan. App. 1990).
24 See Paszamant v. Retirement Accounts, Inc., 776 So. 2d 1049 (Fla. 5th D.C.A. 2001) (where court held a custodian has no duty to monitor investments in a self-directed IRA); and Smith Barney, Inc. v. Henry, 775 So. 2d 772 (Miss. 2001) (where court held that IRA beneficiary was bound to arbitration pursuant to IRA agreement signed by deceased IRA owner).
Kristen M. Lynch is an attorney with the firm of Elk, Bankier, Christu & Bakst LLP in Boca Raton, focusing on estate planning, tax and retirement planning, and various IRA matters. Prior to entering private practice, she worked for SunTrust Private Client Services for over 15 years, working exclusively with high net worth IRA clients. Ms. Lynch is a graduate of the University of Central Florida, Florida Trust School, and Shepard Broad Law Center at Nova Southeastern University. She is a certified trust and financial advisor as well as a certified IRA services professional.
This column is submitted on behalf of the Tax Section, William D. Townsend, chair, and Michael D. Miller, Benjamin A. Jablow, and Normarie Segurola, editors.
