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The Income Taxation of IRAs and IRD Payable to Trusts after SECURE

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          With the shortened payout rule under the SECURE Act, lawyers, CPAs and financial planners will all need to have a better understanding of the taxation of trusts under Subchapter J of the Internal Revenue Code.

          Subchapter J governs how taxable income flows from an estate or trust to its beneficiaries. However, in the world of IRAs, this is a complex and often misunderstood process. This confusion occurs because of the difference between “income” and “principal” for fiduciary accounting under the UPIA and “principal” and “income” under the federal tax law.

          Accordingly, from time-to-time all of us need an update on the inner workings of these two disparate provisions of the law. In the past, because of the longer life expectancy payout rules, these issues had a much lower materiality. With the new 10-year payout, a tremendous amount of income will be paid to trusts and it will be up to the trust’s advisors to develop a plan to retain or distribute that income.
In this class we will address the following:

    • Brief overview of the SECURE Act
    • Taxation of IRAs and Roth IRAs payable to trusts
    • The multi-generation spray trust and how to optimize
    • The §678(a) grantor trust and how this strategy works
    • State taxation of non-grantor trusts and related tax planning
    • Understanding fiduciary accounting “income” for IRAs, including the 10% Rule and the 4% Rule
    • The IRC §691(c) deduction for estate tax paid
    • Understanding California’s modified 10%/4% Rule
    • Develop an understanding of how DNI moves from a trust to beneficiaries when taxable income and fiduciary accounting income are not the same
    • Learn which portions of IRA distributions are DNI and which portions are simply income or principal
    • Develop an understanding of how §§ 661-663 operates to distribute DNI
    • Understand the impact of the separate share rules
    • Understand the acceleration of IRD under pecuniary clauses
    • Learn when the § 642(c) charitable deduction is available
    • Assigning IRAs to charity
    • Study examples on Form 1041 and Form K-1

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Robert S. Keebler, CPA/PFS, MST, AEP (Distinguished) is a partner with Keebler & Associates, LLP and is a 2007 recipient of the prestigious Accredited Estate Planners (Distinguished) award from the National Association of Estate Planners & Councils. He has been named by CPA Magazine as one of the Top 100 Most Influential Practitioners in the United States and one of the Top 40 Tax Advisors to Know During a Recession. Mr. Keebler is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning, and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration. Mr. Keebler frequently represents clients before the National Office of the Internal Revenue Service (IRS) in the private letter ruling process and in estate, gift and income tax examinations and appeals. In the past 20 years, he has received over 250 favorable private letter rulings including several key rulings of "first impression." Mr. Keebler is nationally recognized as an expert in estate and retirement planning and works collaboratively with other experts on academic reviews and papers, and client matters. Mr. Keebler is the author of over 75 articles and columns and editor, author, or co-author of many books and treatises on wealth transfer and taxation, including the Warren, Gorham & Lamont of RIA treatise Esperti, Peterson and Keebler/Irrevocable Trusts: Analysis with Forms. Mr. Keebler is the Chair of the AICPA's Advanced Estate Planning Conference. He is a featured columnist for CCH's Taxes Magazine - "Family Tax Planning Forum," Bob is also a contributing author to the American Bar Association's The ABA Practical Guide to Estate Planning. Robert.Keebler@KeeblerandAssociates.com"

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