RLT as IRA beneficiary

Submitted by Justin Watling on Tue, 2016-07-26 20:29

Owner of a traditional IRA dies well after her RBD. Beneficiary of the IRA is Owner’s Living Trust. Trust meets the four requirements to be treated as a look-through trust Owner’s 4 adult children are the sole beneficiaries of the Trust. Desire is to have the IRA divided into 4 inherited IRA accounts, one each fbo a particular child/beneficiary.

Is this permitted under IRS rules? What provision can be cited as in support of this treatment? Custodian is requesting a PLR cite.

Once the IRA is divided and separate accounts are created, will each beneficiary be able to use his/her age for purpose of computing his/her RMD going forward?



Submitted by Alan - IRA critic on Wed, 2016-07-27 00:41

  • If the trust provisions allow the trustee to terminate the trust, there should be no problem in the creation of separate inherited IRA accounts for the trust beneficiaries. The IRA custodian may wish to examine the trust document to determine if this is allowed or not, but if it is this article should explain why another PLR is not needed:
  • http://www.merrillanderson.com/downloads/proofs/July08study_proof.pdf
  • If trust can be terminated and custodian still refuses, the inherited IRA might need to be transferred to another custodian. Most custodians know that the IRS allows this by now. They just want to avoid setting up the separate inherited IRA accounts.
  • Even though this is permitted, it will NOT change the RMDs for the beneficiaries. RMDs for all of them will continue to be based on the oldest trust beneficiary as of the beneficiary determination date.

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