Filed Under:Annuities, Variable

Natalie Choate Talks Estate Planning & Annuities

What’s coming next: higher taxes in 2013, a wave of boomer Roth conversions and more.

Photo credit: posterize
Photo credit: posterize

To judge by the hundreds of attentive advisors who packed the Chicago Hilton’s International Ballroom on Thursday, nothing can compare to getting estate planning advice from tax lawyer Natalie Choate.

The Harvard-educated, Boston-based counsel in the trusts and estates department of Nutter McClennen & Fish appeared on stage at the National Association of Personal Financial Advisors (NAPFA) 2012 national conference to get into the nuts and bolts of retirement benefits.

No surprise: Choate, right, had plenty to say about IRAs, annuities and the Internal Revenue Service. Big surprise: not only is she smart, she’s funny.

In fact, Choate is a popular speaker on the advisor circuit because she really knows how to engage an audience with her direct speaking style. On Thursday, she urged her listeners to read the brand-new 7th edition of her book, Life and Death Planning for Retirement Benefits, and to send their questions to her website, http://www.ataxplan.com/.

“I love to get questions and answer them,” she told the NAPFA audience, many of whom lined up to buy Choate’s book after her presentation. “I welcome your questions.”

Here are just a few of Choate’s latest tips about recent developments and current trends in estate planning:

New Taxes to Drive Roth Conversions in 2013. In 2013, after this year’s elections, expect to see higher tax rates, Choate advised her NAPFA audience. When that happens, she said, a flood of clients will want to convert their traditional IRAs into Roth IRAs.

“I expect people to do a lot of Roth conversions before the new tax rates go into place,” Choate said.

New IRS Rules for Annuities Inside IRAs. In a recent development so new that it wasn’t even in the handout for Choate’s presentation, the IRS has published rules specifically for minimum distribution of annuity contracts that are inside IRAs.

“Annuities in IRAs are likely to become more important as the baby boomers get older,” Choate said. “The IRS sees these products as fulfilling a need.”

As a result, the IRS’s new rule specifies what type of annuity can be bought inside an IRA, with minimum distribution rules that push retirees to take level payments during their lifetime. Payments must begin at age 70 so retirees can live comfortably until their life expectancy of 86 without passing on a large sum that would function as a wealth shift down the generations.

Qualified Lifetime Annuity Contracts. QLACs for retirees 85 or older will soon be approved by the IRS, Choate predicts. These contracts would be purchased with either 25 percent or $100,000 from an IRA.

“If that is approved, I expect to see a lot of sales of $100,000 QLACs,” Choate said.

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