rmd for remainder beneficiary of ira in qtip trust?
A look-thru qtip trust is the beneficiary of an ira that has been receiving rmd’s based on the spouse’s age using single life non-reclac. The son is the trustee. When the spouse dies the trust instructs the son to place the assets into a remainder trust under his own name with him being the trustee. I believe the son only has limited power to withdraw principal for himself and receives all income. He wishes to dissolve the trust and place the ira into a bda under his own name and distribute other assets in the qtip to himself as well. The qtip trust gives him a special power of appointment to appoint any remaining balance in his remainder trust upon his demise to his spouse and descendants and he has received approaval from them to disolve the trust for his sole benefit. Finally, my two questions are: 1) Would the rmd for the ira continue based on the life of the spouse or his life? 2) Is this legal?
Permalink Submitted by Bruce Steiner on Thu, 2010-12-09 03:41
Do the trustees (assuming a co-trustee is appointed) have discretion to distribute the principal of the trust (in this case, the inherited IRA) to the son?
But even if the trustees have discretion to distribute the principal of the trust to the son, why would they want to do so? If they have the power to distribute principal to the son, they can always distribute to the son whatever amounts they deem advisable (including by taking distributions from the IRA to the extent they want to make distributions to the son in excess of the amounts they are required to take from the IRA).
Permalink Submitted by audrey rappaport on Thu, 2010-12-09 04:47
There is only one trustee for the qtip and the possible remainder trust, the son. I believe he has discretion of principal if it is based on his welfare or to continue his lifestyle. He simply doesn’t want to deal with trusts and wants the ira as well as the assets already in the qtip outright. He was told that if all the beneficiaries he might appoint for his remainder trust agreed, he can do it. Assuming this is correct, what would be his rmd schedule? Thanks!
Permalink Submitted by mk foss on Thu, 2010-12-09 23:50
The QTIP was the original beneficiary and used the life expectancy of the surviving spouse. The fact that she passed away changes nothing – her remaining life expectancy is still used. If the life had been recalculated it reverts to an rmd using her last factor reduced by one for each succeeding year. If the last rmd was for 2008 and no 2010 rmd was taken, reduce the 2008 factor by 2.
If the survivor’s life was not being recalculated the QTIP trust rmds would be based on her life expectancy in the year after the death reduced by 1 for each intervening year.
All of the changes to the trust after her death, will not lenghten the rmd period. I’ll leave it to Bruce to figure whether it can be moved to a beneficiary account for the son.