Estate Planning Essentials: Trusts and Strategies for Phillips 66 Employees

Healthcare Provider Update: Healthcare Provider for Phillips 66 Phillips 66 offers healthcare coverage through multiple providers, primarily Aetna and Blue Cross Blue Shield (BCBS), depending on the employee's home ZIP code. Employees also have access to a Kaiser HMO option if they live in designated areas of California or Washington. The medical plans include comprehensive coverage for various healthcare services, including preventive care, regular checkups, mental health, and substance use disorder treatments. Potential Healthcare Cost Increases in 2026 Healthcare costs for Phillips 66 employees can be expected to rise significantly in 2026, reflecting broader trends impacting the Affordable Care Act (ACA) marketplace. As major insurers are filing for rate increases that may exceed 60% in certain states, Phillips 66 employees could face steep hikes in out-of-pocket premiums, especially if federal subsidies are not extended. The combination of escalating medical costs and the potential loss of enhanced subsidies means many employees may see their premium costs increase substantially, leaving them with difficult choices regarding their healthcare coverage amidst these changing economic conditions. Click here to learn more

Setting up a trust as a beneficiary for your Individual Retirement Accounts (IRAs) provides Phillips 66 employees a way to manage asset distribution beyond their lifetime. This method is key in estate planning, aligning distributions with your goals and legal requirements. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted in December 2019, introduced major changes to the rules around inherited IRAs, making it crucial to understand the different beneficiary categories and how they impact distributions.

Key Elements for IRA Beneficiary Designations

Choosing a trust as your IRA beneficiary lets Phillips 66 employees specify asset distribution terms. The SECURE Act revised distribution requirements for IRAs inherited from those who passed away on or after January 1, 2020. It classifies beneficiaries into three groups: eligible beneficiaries, designated beneficiaries, and non-designated beneficiaries. Understanding the distinctions among these groups is important, as they directly affect distribution rules and tax implications.

Types of IRA Beneficiaries Under the SECURE Act

• Eligible Beneficiaries :  This group includes the IRA owner's spouse, children under 18, disabled individuals, chronically ill persons, and anyone less than 10 years younger than the IRA owner . Eligible beneficiaries can receive IRA assets based on their own life expectancy or the original owner's, with an option for a surviving spouse to treat the IRA as their own.

• Designated Beneficiaries :  Individuals who do not qualify as eligible are subject to the ten-year rule, which mandates that all IRA funds be withdrawn within ten years of the owner's death .

• Non-Designated Beneficiaries : This category includes estates, certain types of trusts, and other entities. The rules depend on whether the IRA owner died before or after the required beginning age for required minimum distributions (RMDs).  If the owner passed away before this age, the five-year rule applies; if after, distributions are based on the owner’s remaining life expectancy .

Using Trusts as IRA Beneficiaries Strategically

Phillips 66 employees may use different types of trusts to manage IRA beneficiary designations effectively, such as conduit trusts and accumulation trusts:

• Conduit Trusts :  These trusts automatically pass all IRA distributions to beneficiaries upon distribution, functioning as pass-through entities that do not affect the beneficiary classification for IRA purposes .

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  Accumulation Trusts : These trusts retain and accumulate IRA distributions over time, often used to help beneficiaries manage inheritance carefully.  However, these trusts generally face less favorable taxation under the five-year payout rule if they include non-individual beneficiaries .

Origins of Trust-Based Beneficiary Designations

Trusts are commonly used to address complex family dynamics, such as providing for children from previous marriages or preserving assets for future tax benefits. They may be structured to give a surviving spouse steady income while maintaining the principal for other beneficiaries.  Qualified Terminable Interest Property (QTIP) trusts, for example, allow the trust owner to control asset division after the spouse’s death, so designated heirs ultimately receive the intended inheritance .

Implications of the SECURE Act

The SECURE Act’s changes to beneficiary categories and distribution rules add complexity to estate planning with IRA s. Employees at Phillips 66 companies, along with their advisors, should consider these changes carefully. Effective planning involves a solid understanding of the beneficiary’s relationship to the deceased and the tax consequences tied to different distribution strategies.

Conclusion

Setting up a trust as your IRA beneficiary is a powerful tool for estate planning, supporting controlled and tax-efficient distribution of assets. However, the complexities introduced by the SECURE Act require detailed analysis and thoughtful planning to meet estate goals without triggering unwanted tax or legal consequences. Consulting with financial and legal professionals is vital to navigate these intricacies and to make the most of IRA estate planning.