Inherited IRA- non spouse beneficiary
I am trying to find out what the next step is in regards to an inherited IRA. This is a timeline of events:
Mother,78, owner of IRA, died in 2013.
Son, 52, beneficiary, opened BDA-RA in 2014
Son declared incompetent and special needs trust established in January 2015. SNT was named owner of the BDA-IRA. Son’s daughter, age 15, is the final beneficiary of the SNT but upon death of son the balance of the SNT is to be set up in a trust for the daughter’s benefit
Son died in March 2015.
All RMDs have been distributed timely.
Does the SNT BDA-IRA have to distribute all of the proceeds within 5 years? I’m assuming that the stretch stopped with the death of the son.
thank you!!
Permalink Submitted by Alan - IRA critic on Thu, 2015-12-17 02:21
If the SNT was drafted correctly, based on PLR 2006 20025, the son would continue to be treated as the designated beneficiary with respect to RMD calculation and the SNT is considered a grantor trust so there is no taxable distribution resulting from the transfer. When the son passes, the remainder beneficiaries of the trust can continue the RMD schedule based on the son’s remaining life expectancy. There is no 5 year rule applicable here, but the IRA custodian will probably try to push out the remaining IRA balance as a lump sum. This should be resisted so the daughter’s trust can receive RMDs at the same rate the son would have had the son lived.