IRA Beneficiary as Trust. Can make into Inheritent IRA?

Submitted by Scott Myers on Tue, 2014-09-30 17:05

First thank you for reading.
Mother-in-law passed away leaving 3 IRA’s and 1 401k all with beneficiary of her trust. Her trust identifies each of her six kids a equal beneficiaries. I’ve heard we could make these into 6 inherited IRA’s (one fore each child) and begin distributions (next year since she was already receiving) under the life expectancy of each child per account.

A couple questions to start.
1) Is this possible?
2) how do the accounts need to be titled
3) Are there special documents which need to be completed for inherited IRA’s to be open.

Thanks again for the help.



Submitted by Bruce Steiner on Tue, 2014-09-30 20:52

It depends on what the Will or trust instrument says.  For more on trusts as beneficiaries of retirement benefits, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal:  http://www.kkwc.com/docs/AR20041209132954.pdf. It makes no sense, however, to create a trust and make it the beneficiary if the trust immediately terminates.

Submitted by mk foss on Wed, 2014-10-01 16:40

When a trust is the beneficiary of the retirement arrangements, the six kids who are the trust beneficiaries cannot each use their own life expectancy. Work with the 401k plan administrator to see if the benefit can be transferred to an inherited IRA for the trust. The IRAs will also need to be transferred from the owner’s name to a trust beneficiary account. After that you can work on separate accounts for each trust beneficiary. This will take some time and lots of cooperation from all of the administrators/custodians involved. 

Submitted by Scott Myers on Wed, 2014-10-01 19:43

Thank you both for your responses, Based on mgtf4 response: We’ll need to create an Inherited IRA for the trust and essentially combine all of the IRA’s and the 401k. Does this have to stay in the Trust with Trust TIN for the distribution period based on the life expectancy of the oldest beneficiary (and tax filing on trust throughout the time). Based on the last statement it sounds like we can divide to each beneficiary but would that be under their TIN’s and life expectancy (understand it will take awhile to get here)?In general we’re just trying to divide her retirment (401k and IRA) without paying taxes for several years on the trust; but under each beneficiaries portion as they receive distributions.

Submitted by Alan - IRA critic on Thu, 2014-10-02 01:15

  • If the trust provisions allow the inherited IRA of the trust to be assigned to the beneficiaries out of the trust, each inherited IRA would be established under the respective SSN of the beneficiary. But the life expectancy of the oldest trust beneficiary would continue to apply to all of the separate inherited IRA accounts. Of course each beneficiary would pay their own taxes on their own distributions.
  • See attached for additional info:    http://www.ataxplan.com/bulletinBoard/ira_providers.cfm

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