Permalink Submitted by Alan Spross on Mon, 2010-01-18 18:46
The key date is your required beginning date, which is April 1st of the year following the year you reach 70.5. Were you to pass prior to that date:
1) If your trust is qualified for look through treatment, RMDs paid to the trust can be based on the life expectancy of the oldest trust beneficiary starting by the end of the year following your death. Most trusts do qualify, but you should verify this with your trust attorney. The trust handles these distributions according to trust provisions.
2) If your trust did not qualify, it would be treated as a non-individual beneficiary and become subject to the 5 year rule. This would require the IRA to be fully drained by the end of the 5 th year following your year of death.
Permalink Submitted by Al Fry on Wed, 2010-01-20 02:09
Good question, Bruce. I have wondered that many times myself. I think sometimes the attorney that drafts the trust tells their client to put averything in (or make payable to) their trust, without explaining the ramifications.
Permalink Submitted by Bruce Steiner on Wed, 2010-01-20 03:36
Alan: I meant why run the IRA benefits through a living trust instead of leaving them to (or in trusts for the benefit of) the individual benefits.
Living trusts are generally overhyped and oversold. While there are reasons for having a living trust in particular cases, or in some states, they aren’t necessary or advisable in every case.
Al: I think that sometimes the promoters of living trusts suggest that everything (including the IRA) be put into or payable to the living trust to justify creating the living trust.
Permalink Submitted by fred ariston on Wed, 2010-01-20 19:07
The reason me and my wife have living trust is to have control of our assets. Our childen are all married but not fully financially responsible yet. If me and my wife are blessed enough to have a long life and our children are fully financially responsible we might reevaluate the value of living trust. Thanks.
Permalink Submitted by Bruce Steiner on Thu, 2010-01-21 04:17
There are reasons for creating a living trust in some cases, but the reasons you mentioned are not among them.
You can control your assets while you are alive, with or without a living trust. After you are no longer alive, you can no longer control your assets, with or without a living trust. If your children are not financially responsible, you can leave their shares to them in trust rather than outright, under whatever terms you want, either under your Will or in a living trust.
Permalink Submitted by Alan Spross on Mon, 2010-01-18 18:46
The key date is your required beginning date, which is April 1st of the year following the year you reach 70.5. Were you to pass prior to that date:
1) If your trust is qualified for look through treatment, RMDs paid to the trust can be based on the life expectancy of the oldest trust beneficiary starting by the end of the year following your death. Most trusts do qualify, but you should verify this with your trust attorney. The trust handles these distributions according to trust provisions.
2) If your trust did not qualify, it would be treated as a non-individual beneficiary and become subject to the 5 year rule. This would require the IRA to be fully drained by the end of the 5 th year following your year of death.
Permalink Submitted by Bruce Steiner on Mon, 2010-01-18 21:12
Why do you want to have a living trust as the beneficiary of your IRA?
Permalink Submitted by Al Fry on Wed, 2010-01-20 02:09
Good question, Bruce. I have wondered that many times myself. I think sometimes the attorney that drafts the trust tells their client to put averything in (or make payable to) their trust, without explaining the ramifications.
Permalink Submitted by Alan Spross on Wed, 2010-01-20 02:25
Perhaps the successor trustee of the trust is the only family member who can handle such issues rationally……………
Permalink Submitted by Bruce Steiner on Wed, 2010-01-20 03:36
Alan: I meant why run the IRA benefits through a living trust instead of leaving them to (or in trusts for the benefit of) the individual benefits.
Living trusts are generally overhyped and oversold. While there are reasons for having a living trust in particular cases, or in some states, they aren’t necessary or advisable in every case.
Al: I think that sometimes the promoters of living trusts suggest that everything (including the IRA) be put into or payable to the living trust to justify creating the living trust.
Permalink Submitted by fred ariston on Wed, 2010-01-20 19:07
The reason me and my wife have living trust is to have control of our assets. Our childen are all married but not fully financially responsible yet. If me and my wife are blessed enough to have a long life and our children are fully financially responsible we might reevaluate the value of living trust. Thanks.
Permalink Submitted by Bruce Steiner on Thu, 2010-01-21 04:17
There are reasons for creating a living trust in some cases, but the reasons you mentioned are not among them.
You can control your assets while you are alive, with or without a living trust. After you are no longer alive, you can no longer control your assets, with or without a living trust. If your children are not financially responsible, you can leave their shares to them in trust rather than outright, under whatever terms you want, either under your Will or in a living trust.