Required distributions from a see-through trust
Trust was named the beneficiary of an IRA owned by the decedent. Trust is a qualified see-through trust. Trust has been taking RMD’s since decedent’s death. Trust requires 20% of the trust be distributed out to beneficiary at age 30. Trust has no other assets other than the IRA. In order to meet the required trust distribution but to avoid incurring taxes on the IRA (other than the RMD) can the trust do a trustee-to-trustee transfer to a decedent’s IRA fbo the beneficiary and have the transfer qualify as tax free (again, withdrawing the RMD prior to the transfer)?
Permalink Submitted by Alan - IRA critic on Tue, 2017-03-07 16:35
Does the trust instrument allow the trustee to terminate the trust? If so, the inherited IRA could be assigned to the trust beneficiary, but the money already in the trust would have to be distributed to the beneficiary. If the trust has been paying tax on the accumulated distributions, proper trust accounting would not result in any double taxation when distributed out of the trust.
Permalink Submitted by Ben Meyer on Wed, 2017-03-08 05:47
Permalink Submitted by Bruce Steiner on Wed, 2017-03-08 17:05
Why not distribute 20% of the inherited IRA in kind? While mandating distributions is generally not optimum (it throws the distributed assets into the recipient’s estate, and exposes it to the recipient’s creditors and spouses), it won’t cause any adverse income tax consequences.