The Importance of Consistent Estate Planning

An important lesson in coordinating all accounts and estate planning tools to match estate planning goals was illustrated in a recent Private Letter Ruling. A trust was created which named charities to receive donations from the trust. There was not enough funding for the charitable contributions, but the trust was named as a beneficiary of an IRA. A state court approved the taxpayer’s petition to reform the trust so the funds from the IRA to the trust and then from the trust to the charities would be direct bequests from the IRA to the charities.

In  Private Letter Ruling (201438014), the court’s grant of the reformation for the purpose of beneficial tax treatment was not allowed, and the IRA distribution to the Trust would be income. Additionally, the donations would not be deductible because gross income was not required under the trust terms to be used to make the donations.

See Joseph Tamburello, Coordinate Your IRA Beneficiary Designation With the Terms of Your Estate Plan, The National Law Review, Dec. 18, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.