Separate IRAs from Trust
QRP monies of now deceased parent designated a trust to be the beneficiary. There are two kids (one 27 and the other 30) who are the beneficiaries of the trust.
Does the option to separate the QRP monies into separate IRAs depend on how the wording in the trust? I have read thru the trust and it does not specify this, so I am wondering if it needs to or if the beneficiaries can simply chose if they can have separate IRAs (with all RMDS being based on oldest, of course) or if they must flow all RMDS thru the trust in the future (from a deceased IRA account with trust name on it).
The bottom line: Does the trust language need to spell out the allocation of any qualified monies (one IRA vs. two separate IRAs–one for each kid).
Permalink Submitted by Al Fry on Sun, 2007-09-02 17:19
There is no reason the distribution could not be in two IRAs, since they will be titled exactly alike with same bene. As you said, the RMDs will be based on thje oldest’s LE. One reason for doing this is that if the trust will dissolve at a later date, it will ease distribution to the trust benes. One caution (in my mind); they should be invested exactly alike while in the trust, if they comprise the bulk of trust assets; otherwise they may have to make a larger distribution than necessary from one to equalize the distribution when trust terminates. Of course the trust language will determine what is paid out of trust (if anything) in the meantime. Just my thoughts.
Permalink Submitted by Jonathan Mazur on Sun, 2007-09-02 18:03
Does the trust language need to be written in a certain way to allow for individual IRAs?
Permalink Submitted by Al Fry on Sun, 2007-09-02 18:40
I would not think so. It may not even have a reference to inherited IRAs. Many revocable trusts end up being see-through trusts by default. It may have a reference to RMDs, however, which may be bad or good, depending on the proposed objectives of the grantor and benes, which could be diverse. If no reference to RMDs, the uniform principal and income act rules may prevail.