ACTEC Request for Guidance Clarifying Reg. 1.401(a)(9)-5, A-7(b) and (c) - Resources | The American College of Trust and Estate Counsel

ACTEC Request for Guidance Clarifying Reg. § 1.401(a)(9)-5, A-7(b) and (c)

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Daniel H. Markstein, III
Maynard, Cooper Gale, P.C.
1901 6th Avenue North
2400 AmSouth/Harbert Plaza
Birmingham, Alabama 35203-2602
Direct Dial: (205) 254-1043
E-mail: dmarkstein@maynardcooper.com

October 23, 2007

Via email: mariorie.hoffman@irscounsel.treas.gov

Ms. Marjorie Hoffman
Special Counsel, Tax-Exempt & Government Entities
Internal Revenue Service
1111 Constitution Avenue, N.W.
Room 4306
Washington, D.C. 20224

Re: Request for Guidance Clarifying Reg. § 1.401(a)(9)-5, A-7(b) and (c)

Dear Ms. Hoffman:

I am writing to you on behalf of the American College of Trust and Estate Counsel ("ACTEC") to ask that you issue a published ruling further to clarify the manner in which the minimum distribution rules will be applied when a trust is the beneficiary of a decedent's retirement plan.

In a letter addressed to you and dated March 27, 2003, Virginia Coleman, on behalf of ACTEC explained the need for guidance on this matter. A copy of that letter is enclosed.

As explained in the enclosed letter, taxpayers need clarification of the distinction between a "contingent beneficiary" and a "successor beneficiary." Taxpayers who have family members who require the protections afforded by a trust, such as minors, may wish to designate a trust as a beneficiary of a retirement plan. However, unless the trust requires that all amounts withdrawn from the plan be distributed immediately to the beneficiaries of the trust (a "conduit trust"), there is a concern that required minimum distributions may not be calculated based on the beneficiary's life expectancy. Conduit trusts rarely provide the protection for beneficiaries that a trust is intended to provide. Thus, taxpayers are forced to forgo the option to allow amounts withdrawn from a retirement plan to be accumulated in the trust for later distribution to or for the benefit of a beneficiary or risk accelerating required distributions from retirement plans. This result obtains even where the trust terminates when a beneficiary reaches a specified age.

Moreover, much of the guidance has been provided on this subject through private letter rulings. IRC Section 6110(k)(3) of the Internal Revenue Code provides that a taxpayer may not rely on a private ruling issued to another taxpayer. In addition, the private letter rulings appear to be inconsistent in important respects, and the factual predicates for the rulings are not always completely described. Therefore, we ask that you issue a revenue ruling on this issue.

Representatives of ACTEC would be pleased to meet with you to discuss why we think that this matter should be given a high priority. ACTEC also will be pleased to offer any technical assistance that you may find useful in carrying out this project.

The College supports legislation to prohibit the patenting of tax planning strategies so that taxpayers may use legitimate tax reduction methods to satisfy their obligations to pay taxes without concern that they may become liable for infringement of a tax strategy patent.

Very truly yours.

Daniel H. Markstein, III
President

Encl.

cc:    Encl. cc: Nancy J. Marks, Division Counsel/Associate Chief Counsel
        (nancy.j .marks@irscounsel.treas.gov)
        Catherine E. Livingston, Assistant Chief Counsel
        (catherine.e.livingston@irscounsel.treas. gov)
        Ellen K. Harrison, Esq.