moving to inherited IRA after paying out to trust as benefic
If a trust was the beneficiary on an IRA, and proceeds paid out to the trust, can the trust beneficiaries now roll the funds to their own inherited IRA, as if they were the direct beneficiaries of the IRA?
Permalink Submitted by Alan Spross on Thu, 2011-03-24 16:37
No. Once the IRA is distributed and there is no spousal beneficiary, the IRA can no longer exist.
If the trust was permitted to terminate, the IRA could have been assigned to the beneficiaries of the trust, but not after a distribution. This could be very costly and the trust beneficiaries may have recourse for legal action against the trustee of the trust for authorizing the IRA distribution. At this point, if the trustee is allowed to distribute income, the IRA distribution could be passed through to the beneficiaries on a K1. Taxes would then be due using their individual marginal tax rates instead of the higher rates that apply to trusts or estates.