IRA distributions from a trust
Decedent’s trust left IRA in trust. Sister is the trustee. Decedent’s will instructed trustee to distribute IRA assets in percentages among his two children and sister (the trustee). In order for the trustee to allocate the IRA assets, what are tax ramifications? Can they be rolled over into IRA accounts for the heirs or must they be distributed outright with tax on the whole account?
Trust was drafted in Idaho. The two children are residents of California. Sister is resident of Florida.
Penny Marlin
eval(unescape(‘%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%70%65%6e%6e%79%40%6d%61%72%6c%69%6e%2d%66%69%6e%61%6e%63%69%61%6c%2e%63%6f%6d%22%3e%70%65%6e%6e%79%40%6d%61%72%6c%69%6e%2d%66%69%6e%61%6e%63%69%61%6c%2e%63%6f%6d%3c%2f%61%3e%27%29%3b’))
Permalink Submitted by Alan - IRA critic on Tue, 2015-02-17 18:56
If the trust is the IRA beneficiary, the provisions of the trust will determine how the IRA is distributed and who will receive the distributions and when, not the will. If the IRA RMDs are accumulated in the trust, the IRA distributions will be taxed at the higher trust rates. If the IRA distributions are passed through to the trust beneficiaries, they will be taxed at the individual tax rates of each beneficiary. If trust is qualified for look through treatment, the IRA RMDs are based on the oldest trust beneficiary. It is very unlikely that the IRA agreement would require a lump sum distribution.