Estate as Beneficiary
We are the custodian of an IRA for a client who was in pay status when he died. He named his estate as the beneficiary of his IRA. The Executor wants to transfer the IRA directly to a GST trust that was created under the client’s Will. We have told the Executor that the IRA needs to be paid to the estate first, renamed as an inherited IRA account for the benefit of the estate. Then he, as Executor, can create a new inherited IRA account in the name of the GST Trust, e.g., Client, deceased, Beneficiary IRA f/b/o XXX Trust. Can you please let me know if this two step process is correct. Also, we believe the first transfer will not be a distribution triggering income tax. Will the Executor’s transfer of the inherited IRA from the estate account to an account in the name of the GST trust be deemed a distribution or can the IRA still be paid out over the deceased client’s life expectancy to the trust beneficiaries?
Permalink Submitted by mk foss on Sat, 2014-03-29 01:37
It is possible for this to work, but you will need the cooperation of the custodian. First step is to TRANSFER IRA to beneficiary IRA naming the estate – your post says “IRA needs to be paid” – anything paid will be taxable. Then the executor would send a letter to the custodian saying that the estate is terminiating and the IRA is to be TRANSFERRED to an inherited IRA in the name of the trust. You need persistence to make this all happen.