IRA Trust Beneficiary Question
A client of mine passed away leaving her trust as the priamry beneficiary of her IRA. The trust names her two sons as successor trustees as well as beneficiaries of the the trust. One beneficiary (youngest brother) wants to take a lump sum distribution of his share and the other brother wants to stretch his share. First is this possible? I assume it is. And secondly, is the income taxable to the trust or does it pass through to the beneficiary receving the income?
Thank you.
Permalink Submitted by Alan Spross on Tue, 2010-10-26 17:54
The answer to both questions depends on the terms included in the trust.
If the trust provisions do not restrict distributions from the IRA OR the trust, then the trustee can request a lump sum IRA distribution of the youngest beneficiary’s share and pass it through on a K1 to the beneficiary to report on their individual return. The oldest beneficiary can then take life expectancy distributions based on his age if the trust is qualified for look through treatment. Perhaps the trust can terminate and then the IRA can be assigned directly to the remaining beneficiary.
Permalink Submitted by Gary Warner on Tue, 2010-10-26 18:38
Thanks for the quick reply. It appears that there are no distribution restrictions on the trust beneficiaries unless they are younger than age 25 (which they are not), the trust states that each share allocated to a living child of the Trustor shall be distributed to such child, free of trust. The trust does have a termination clause that states that “This trust shall cease and terminate on the death of the Trustor”.