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Terms & Condition

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

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Retirement Perspectives

While Congress debates various tax reforms, don’t forget about a tax break that already exists for certain heirs.

For all the headlines about baby boomers being woefully unprepared for retirement and possibly paying  more federal taxes on retirement plan distributions, there is a large tax break available to people who inherit IRA or 401(k) plan assets—and most taxpayers aren’t even aware of its existence. It’s called “Income in Respect of a Decedent” (IRD), and it’s worth a closer look by advisors and clients alike. 

We’ll address further this often-missed tax break from the Internal Revenue Service in a moment, but first, here’s some background. Beginning in 1918, all inherited assets received a step-up in basis for income tax purposes. This meant that the market value of an asset at the owner’s death became its cost basis for whoever inherited that asset. In addition, beneficiaries paid no income tax on the value of the property they inherited. In 1934, however, lawmakers decided that certain items of income should not receive a step-up in basis; thus, the IRD was introduced. There were no IRAs at that time, and little did officials know the amount of income tax that would one day be generated by their IRD concept.

As tax-advantaged accounts, IRAs and other retirement programs are generally first subject to ordinary income tax when there is a distribution of funds from an account. The rules governing taxation of distributions generally are the same for the account owner, and upon his or her death, the account’s beneficiaries. In other words, beneficiaries absorb the income tax liability on the benefits they’ve inherited. But the estate of the deceased IRA owner is responsible only for the income-tax liability on distributions. Some beneficiaries may get a double whammy: they not only pay income tax on the distribution but also estate taxes over a certain amount.

In other words, an inherited IRA retains the same makeup as it would have if the decedent were alive to receive it. IRAs potentially are subject to double taxation, as their value is includible in the estate and counted as earned income. How? When a taxable IRA is inherited, the beneficiary who subsequently takes distributions pays income tax just as the IRA owner would have had he or she lived.  

Being Fair to Heirs
Does that double taxation sound unfair? Well, there’s some good news for retirement-plan beneficiaries: Section 691(c) of the Internal Revenue Code allows an IRA beneficiary to claim a tax deduction for assets that are classified as IRD. Strange as it may seem, the IRS does not explicitly define IRD. Instead, it’s referred to as “amounts to which a decedent was entitled as gross income, but which were not properly includible in computing his taxable income for the taxable year ending with the date of his death or for a previous taxable year” (IRS Regulation Section 1.691(a)-1(b)). By this reckoning, IRD is income that is owed to a decedent at the time he or she died.

Claiming an IRD Deduction
An IRA beneficiary could claim an IRD deduction at the time of the distribution from the IRA to the extent of any federal estate taxes that were caused by the inherited IRA. If the IRA generates an estate tax in the estate of a decedent, Section 691(c) allows the beneficiary taking a distribution from the retirement plan to deduct against the distribution the portion of the federal estate tax attributable to the IRA in the decedent’s estate.

Although Roth IRAs are subject to estate taxes, beneficiaries of Roth accounts usually do not qualify for IRD deductions. This is because Roth IRA distributions are not subject to income tax. However, if a Roth IRA beneficiary takes a “non-qualified distribution,” he or she could apply for the IRD deduction—but only from the portion of the distribution considered earnings.

IRD items (along with other estate assets) eventually will be distributed to the beneficiaries of the estate. While the beneficiaries receive, income-tax free, most of the assets of the estate, IRD assets (such as IRAs) generally are taxed at beneficiaries’ ordinary income tax rates. However, if a decedent’s estate has paid federal estate taxes on the IRD assets, a beneficiary may be eligible for a tax deduction under Section 691(c) based on the amount of estate tax paid. The IRD deduction is used to reduce the beneficiary’s income tax on withdrawals made from the IRA. It’s important to note that the IRD deduction is determined solely on federal estate taxes, not by any state estate tax liability.

When Estate Taxes Apply  
For advisors, the key is to determine whether or not your client paid estate taxes in 2017. In 2017, estates valued at less than $5.49 million will not be subject to a federal estate tax. Estates greater than $5.49 million, though, will be subject to a top tax rate of 40%. If estate tax was paid on an inherited IRA or 401(k), it is likely that the holder can claim the IRD deduction. The proper place to record this deduction is within the section Schedule A, of Form 1040, as a “miscellaneous itemized deduction,” not subject to the 2% of adjusted gross income (AGI) offset.

The IRS does not offer any dedicated forms for claiming the deduction. Instead, we suggest reading the IRS publication, “Survivors, Executors, and Administrators,” for more information and examples regarding calculation of the IRD deduction.

Again, not every beneficiary can claim the IRD deduction. If the estate is not subject to federal estate taxes then no IRD deduction is available.

Other IRD Applications
Here, we’ve described an IRD strategy using an IRA as the focal point. There are number of other retirement assets whereby an IRD may be applicable, including 401(k) plans, along with most other retirement plans that house pretax assets. The list of IRD assets includes, but is not limited to, deferred compensation, employer nonqualified stock options, nonqualified deferred annuities, and net unrealized appreciation (NUA) on company stock in retirement plans. (For more information on NUA, see here.)  

The Bottom Line
Partnering with a tax professional will provide valuable assistance in calculating, and claiming, the IRD deduction. This often overlooked deduction could result in sizeable tax savings, which could provide a measure of comfort for current retirement accountholders—and their prospective heirs.

If you have any questions about this or another retirement topic, please email Brian at roadtoretirement@lordabbett.com.

 

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

The information is being provided for general educational purposes only and is not intended to provide legal or tax advice. You should consult your own legal or tax advisor for guidance on regulatory compliance matters. Any examples provided are for informational purposes only and are not intended to be reflective of actual results.

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett's products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

Income in respect of a decedent (IRD) is money that was due to a decedent and will pass through to the recipient or estate as income during that tax year. The recipient (beneficiary) must declare the money as income in respect of a decedent (IRD) for any year in which income is received.  A few examples of IRD include retirement plan assets, IRA distributions, unpaid interest and dividends, salary, wages, and sales commissions. Items of IRD, along with other estate assets, are eventually distributed to the beneficiaries of an estate. While the beneficiaries receive most assets of the estate income tax free, IRD assets are generally taxed at beneficiaries’ ordinary income tax rates. However, if a decedent’s estate has paid federal estate taxes on the IRD assets, a beneficiary may be eligible for an IRD tax deduction based on the amount of estate tax paid.

Traditional IRA contributions plus earnings, interest, dividends, and capital gains may compound tax-deferred until you withdraw them as retirement income. Amounts withdrawn from traditional IRA plans are generally included as taxable income in the year received and may be subject to 10% federal tax penalties if withdrawn prior to age 59½, unless an exception applies.

A Roth IRA is a tax-deferred and potentially tax-free savings plan available to all working individuals and their spouses who meet the IRS income requirements. Distributions, including accumulated earnings, may be made tax-free if the account has been held at least five years and the individual is at least 59½, or if any of the IRS exceptions apply. Contributions to a Roth IRA are not tax deductible, but withdrawals during retirement are generally tax-free.

A SIMPLE IRA plan provides small employers with a simplified method to contribute toward their employees' and their own retirement savings. Employees may choose to make salary reduction contributions and the employer is required to make either matching or nonelective contributions. Contributions are made to an Individual Retirement Account (IRA) or annuity set up for each employee (a SIMPLE IRA). A SIMPLE IRA plan account is an IRA and follows the same investment, distribution and rollover rules as traditional IRAs.

SEP IRA—A Simplified Employee Pension Plan is a retirement plan specifically designed for self-employed people and small-business owners. When establishing a SEP IRA plan for your business, you and any eligible employees establish your own separate SEP IRA; employer contributions are then made into each eligible employee's SEP IRA.

401(k) is a qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on an aftertax and/or pretax basis. Employers offering a 401(k) plan may make matching or nonelective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

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