Can trustee create inherited ira

Submitted by Katrenia Collins on Fri, 2017-01-27 20:52

Can the trustee of a see-through retirement trust create an inherited IRA if it receives a lump sum distribution from pension plan?



Submitted by Alan - IRA critic on Sat, 2017-01-28 00:32

No. Once a distribution is made other than to a surviving spouse, it is taxable. The trustee should probably have requested only the RMD.

Submitted by Katrenia Collins on Sat, 2017-01-28 01:30

No distributions have been made.  Under the pension plan, the only payout option available to a non-spouse beneficiary is a lump sum. If the trustee has not received any distribution, can Trustee then set up an inherited IRA for the trust beneficiary and request that the benefits go directly from the pension plan to the Trustee of the inherited IRA, then get the RMD from the inherited IRA?

Submitted by Alan - IRA critic on Sat, 2017-01-28 04:27

I think the plan is in violation of WRERA signed by Bush in 2008. Under the following provision an optional direct rollover to a non spouse beneficiary or a trust qualified for look through treatment was made mandatory starting in 2010. In other words the plan MUST offer a direct rollover to an inherited IRA of the trust just as they would to a retired participant.

Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions (Act sec. 829 and Code sec. 402(c)(11), (f)(2)(A)) The Act permits rollovers of benefits of nonspouse beneficiaries from qualified plans and similar arrangements.  The provision clarifies that the current law treatment with respect to a trustee-to-trustee transfer from an inherited IRA to another inherited IRA continues to apply.  Under the provision, effective for plan years beginning after December 31, 2009, rollovers by nonspouse beneficiaries are generally subject to the same rules as other eligible rollovers

Submitted by Katrenia Collins on Sat, 2017-01-28 20:52

Thanks!

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