Trust as IRA Beneficiary/Inherited IRA
I was on the conference call yesterday and Ed was saying to not name a trust as a beneficiary of an IRA/401k because you could not do a Stretch. I just read the newsletter from February and on page 3 it talks about being able to take advantage of the non-spouse transfer provision is the trust qualifies as a “see-through” or “look through” trust. How can I tell if my trust and/or my clients would qualify for this provision?
Thanks. Ryan
Permalink Submitted by Alan Spross on Thu, 2008-02-21 17:15
Look at the list of requirements in Pub 590 on page 39. These apply to trusts named as plan beneficiaries. In addition, Sec 829 of the PPA indicates that such a trust can establish an inherited IRA to receive a direct transfer from an employer plan and the beneficiaries will be allowed to use the life expectancy of the oldest beneficiary to determine the RMD. Following is Q 16 pasted from Notice 2007-7:
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Q-16. If the named beneficiary of a decedent is a trust, is a plan permitted to
make a direct rollover to an IRA established with the trust as beneficiary?
A-16. Yes. A plan may make a direct rollover to an IRA on behalf of a trust
where the trust is the named beneficiary of a decedent, provided the beneficiaries of the
trust meet the requirements to be designated beneficiaries within the meaning of
§ 401(a)(9)(E). The IRA must be established in accordance with the rules in Q&A-13 of
this notice, with the trust identified as the beneficiary. In such a case, the beneficiaries
of the trust are treated as having been designated as beneficiaries of the decedent for
purposes of determining the distribution period under § 401(a)(9), if the trust meets the
requirements set forth in § 1.401(a)(9)-4, Q&A-5, with respect to the IRA.
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