Look-through trust & Spouse beneficiary
Good Afternoon
The facts
IRA account owner passes away
Trust qualifiying as a look-through is the beneficiary
surviving spouse is the sole beneficiary of the trust
Questions:
Can the spouse (as sole beneficiary) rollover the full IRA balance to his/her own (even though the trust is the beneficiary)?
Can the spouse rollover the RMD that is based on his/her life expectancy their own IRA?
What implications if any if the trust is a conduit trust? discretionary trust?
If allowed the transaction mechanics are as follows:
(1)RMD or r/o amount withdrawn from the inherited IRA (2) deposited into the trust (3) removed from trust and deposited into the spousal IRA
Permalink Submitted by Alan Spross on Wed, 2012-02-22 21:14
The trust provisions apply with respect to rollover options. Can the trust be terminated? Is the spouse also the trustee of the trust? If the spouse is the trustee and has discretion, she should be able to do the rollover with the mechanics you described. However, if the trust was designed in a way that does not permit this, then it will take extra legal expense for the surviving spouse to change the trust.
If there are no contrary provisions in the trust, the IRS has approved rollover treatment for the surviving spouse, and as the IRA owner RMDs would be solely based on that spouse’s life expectancy. The spouse would be considered as owning the IRA all year in the year of the rollover as long as it was not the year of death for IRA owner. The beneficiary RMD for that rollover year would be erased and could be rolled over to the extent it exceeded the surviving spouse’s RMD.
Permalink Submitted by Bruce Steiner on Wed, 2012-02-22 23:45
Perhaps. See my article on that subject in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf