Trust as beneficiary of an IRA
After our client died, his IRA was moved to a beneficiary IRA FBO of the Trust. Per the trust his sister receives the income and at her death the remainder of the the trust assests are to be distributed to a charity.
Can we use his sister’s life expectancy to calculate RMD’s and stretch this IRA over her lifetime, or is this IRA now subject to the 5-year distribution rules??
Permalink Submitted by Peter Lingane on Sat, 2011-04-02 20:44
Possibly. I suggest reading Choate, (2011), pp. 410 – 449, especially, Sec. 6.3.05.
Permalink Submitted by Alan Spross on Sun, 2011-04-03 00:09
Peter,
Don’t have her book. Is this article that indicates the stretch may be possible only if the trust is a conduit trust equivalent to the book reference?
http://advisor.morningstar.com/articles/fcarticle.asp?docId=16663
Permalink Submitted by Peter Lingane on Sun, 2011-04-03 16:56
If Rob’s trust is a “conduit trust” and meets four other conditions, the charity can be ignored for purposes of determining the RMD.
Ms. Choate goes into detail in her book as to what is and what is not a conduit trust. The article that Alan referenced is more of an overview.
Bruce Steiner ( bsteiner July 25, 2010 post and the article referenced therein) has discussed conduit trusts.
Choate has been cited dozens of times in this forum. Indeed, answers to most questions can be found in her book. It is well written, exhaustively footnoted and costs only about a hundred dollars (including tax and shipping) at ataxplan.com.
All advisers who deal with IRAs and pensions should have her book near to hand.
Sorry if this sounds like a commercial. Ms. Choate would not recognize my name and, unfortunately, I have no financial interest in her publishing business.
Permalink Submitted by Bruce Steiner on Mon, 2011-04-04 01:26
Here is my article on trusts as beneficiaries of IRAs: http://www.kkwc.com/docs/AR20041209132954.pdf.