Can a Trust rollover to an Inherited IRA?

Submitted by John Peterson on Wed, 2016-08-03 22:21

RLT is named as death beneficiary of a qualified plan.

At participant’s death Trust becomes irrevocable and a separate tax entity.

As a non-spouse beneficiary can the Trustee establish an Inherited IRA and receive a direct rollover of the qualified plan balance?

If so is the Trust both the “owner” and beneficiary of the IRA?



Submitted by Alan - IRA critic on Wed, 2016-08-03 23:12

Only if the trust is qualified for look through treatment. The inherited IRA is then re titled showing the trust as beneficiary and RMDs are based on the oldest beneficiary of the trust. If the trust is not qualified according to IRS requirements, a direct rollover to an inherited IRA is not permitted.

Submitted by Ben Meyer on Thu, 2016-08-04 13:46

  • It appears that, under IRS rules, qualification of the trust must be established by furnishing trust documentation to the IRA custodian or QRP recordkeeper by October 31 of the year following the year of the owner’s death.  Also the three other IRS requirements must be fulfilled.by the trust (valid under state law, irrevocable, and identifiable individual beneficiaries).  
  • In the situation where the trust has both charities and natural persons as beneficiaries, may the trust request a partial distribution of the percentages due to be given to the charities, before the October 31 determination date?  The distribution would be made to the trust.  The trust can then make full distributions to the charities, also before the October 31 date.  Then, when the trust makes submission of the trust documents to the IRA or QRP by the October 31 date, will the trust achieve qualification, since, at that time, all remaining beneficiaries will be natural persons?  The goal is to achieve qualification for look-through treatment for the natural persons who are trust beneficiaries.
  • Would the result differ in following the procedure described above for an IRA versus a QRP?

Submitted by John Peterson on Thu, 2016-08-04 14:11

Allow me to use an example to focus on issues.I’m unmarried and have named my RLT as beneficiary of my 401k account.The RLT names my brother Tom as Trustee and my 2 sons Dick (age 40) and Harry (age 20) as equal beneficiaries.I die, the trust becomes irrevocable and meets all the requirements for look-thru treatment for RMD purposes.1. Can Tom make a tax deferred non-spousal rollover of my 401k account to a single inherited IRA in the name and EIN of my Trust? 2. Are RMDs calculated on the age of the oldest beneficiary or split 50/50 between the 2 shares?3. Can Tom make the rollover to 2 inherited IRAs if #2 is a problem?Thanks     

Submitted by Bruce Steiner on Thu, 2016-08-04 14:50

In your example, if the trust is going to pay out to Dick and Harry outright, you could name Dick and Harry as beneficiaries of the IRA and avoid these issues. Alternatively, you could name trusts for Dick and Harry as the beneficiaries of the IRA.

Submitted by Alan - IRA critic on Thu, 2016-08-04 17:00

To your questions.

  1. Yes, Tom can do a direct rollover to an inherited IRA with the trust as beneficiary. For a qualified trust, the plan must comply.
  2. RMDs paid to the trust are calculated using Dick’s life expectancy, the oldest beneficiary.
  3. If the trust provisions allow Tom to distribute the IRA out of the trust to the beneficiaries, the RMDs would not change because the separate account rules do not apply to trusts. But each beneficiary would have full control over their own inherited IRA. Note that creditor protection afforded by the trust would be lost after the IRA is distributed to the beneficiaries.

Submitted by [email protected] on Fri, 2016-08-05 13:10

“To an IRA” includes a Roth IRA which is an unusual opportunity for non-spouse bene. 

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