Q: It looks like President Trump has directed the Justice Department to criminally investigate Fed Chair Jerome Powell over a building renovation project. Could it work to force Powell out?
A: Actually, this latest drama might have the opposite effect. Trump’s actions could keep Powell in place as Fed Chair beyond the scheduled end of his term.
By law, a Fed governor can continue to serve on the board until their successor is appointed by the President and confirmed by the Senate. Without a successor in place, there’s no automatic expiration and vacancy to fill. Trump can’t just get rid of him, unless he fires him for “cause.” In my view, the Supreme Court would strike down any attempt by Trump to fire him.
Here’s how this might play out.
The Senate Banking Committee is the first to act on any Fed nominee before it can reach the Senate floor for a full confirmation vote. And, one Republican committee member, Senator Thom Tillis of North Carolina, isn’t happy with this investigation. That’s an understatement.
Senator Tillis announced that he won’t vote in favor of any replacement for Powell until all of this investigation talk disappears. His no vote would deadlock the committee. Without his support, there is no confirmation and no successor to Powell.
Now, there is a special motion by the full Senate that could bypass the committee step, but that’d take 60 votes. That’s not going to happen. So, if the investigation continues, it looks like Powell could stay on as Fed Chair, by default, longer than planned. Either Trump faces this unintended consequence, or he backs down.
Q: I’ve heard that naming my trust as the beneficiary of my IRA can create problems. I don’t exactly know why that’s the case. Can you explain?
A: Naming a trust as your IRA beneficiary can work, but it’s something that has to be done carefully. It all comes down to language in your trust and whether or not it qualifies as a “see-through” trust.
What is a see-through trust? It’s a trust where all beneficiaries are clearly identifiable people. That means you aren’t also naming charities among your list of trust beneficiaries. If you add them to the mix, it can disqualify it as a “see through” trust.
If your trust qualifies as a see-through trust, things can go pretty smoothly. If it’s deemed a non-qualified trust, the IRA distribution rules can get more complex.
If you died before your required minimum distributions (RMDs) started, the entire IRA has to be emptied within five years. Naturally, this shorter distribution period can increase the tax burden for some of your beneficiaries. The normal length is ten years.
If you died after your RMDs started, your beneficiaries’ IRA distributions can be stretched out over your remaining life expectancy (treating you very much like a zombie.)
This slower, longer distribution period might actually seem like a pretty nice deal. But, it also comes with an unintended consequence. Your successor trustee might have a longer-than-desired job ahead of them.
