Trust (as IRA Beneficiary)
Hold on to your seats…I have a good one.
FACTS
T-IRA owner, 79, died in 2012
surviving spouse 100% sole primary beneficiary
spouse disclaims
Testamentary trust 100% contingent beneficiary inherits – via disclaimer
Spouse,78 is also the sole beneficiary of the trust
Note- I am not sure if the trust qualifies as a look-through
QUESTIONS
Whose life-expectancy is used? I would think the surviving spouse
Which RMD table is used? Single-life? The spouse has now inherited via the trust as a beneficiary Further – the “reduce-by-one” method is used” each year to calculate the RMD. Am I correct?
The kids – inherit upon mom’s passing. They can continue the stretch – they will be stuck using mom’s remaining life expectancy. Correct?
Bonus question – What could possibly serve as a reason for disclaiming – to inherit via a trust? It seems (to me) the client would be must better offer inheriting directly. no?
Permalink Submitted by Alan - IRA critic on Wed, 2014-08-06 20:16
Surviving spouse life expectancy applies if trust is qualified. Single life table is used for RMDs and recalculation applies (new table divisor each year instead of 1.0 reduction). Successor beneficiary children must change over to the 1.0 reduction after mother passes (non recalculation). The trust will provide better creditor protection since inherited IRA creditor protection has ended in states that have not passed legislation to to accord inherited IRAs with creditor protection. But the stretch is shorter since the Uniform Table cannot be used unless the trust terminates and the surviving spouse does an IRA rollover. And the children do not get their own stretch as they are not designated beneficiaries as they would be if mother had done the rollover.