Can benificiaries of a Trust recieve their funds into an inherited IRA
Can the beneficiary of an Irrevocable Trust receive their proceeds from the trust directly into their inherited IRA or must they receive the funds in cash and pay the tax?
Is the trust the beneficiary of an IRA owned by decedent? What are the terms of the trust relative to distribution of trust assets to trust beneficiaries? The terms of the trust determine what the trustee of the trust is allowed to do. Sometimes the trustees have been granted discretion to make certain choices.
The trust is the beneficairy of an IRA owned by the decedent. There are 4 beneficiaries of the trust. Can the beneficiaries recieve their proceeds into Inherited IRA’s for each one, or must they receive the proceeds in cash and pay tax? What can they do to create stretch IRA’s?
Again, it depends if the trust provisions allow the trustee to assign portions of the IRA to the trust beneficiaries. This is OK with the IRS, but the decedent might have drafted the trust such that the beneficiaries would have to receive any distributions through the trust. As such the IRA would be protected against creditors of the beneficiaries. If IRA shares were assigned directly to the beneficiaries, such creditor protection would be lost in most states. Note that even if the IRA is assigned to the 4 beneficiaries, the RMD for each must remain based on the oldest of the 4.
If the trust provisions allow the trustee to assign portions of the IRA to beneficiaries, what would happen? Would each person have their own inherited IRA or will they have to recieve in cash?More Importantly can seperate IRA’s be established for each beneficiary to keep deferal of taxation?
Each trust beneficiary would have their own inherited IRA and the change of title to the beneficiary would not be reportable as a distribution. Each beneficiary would have full control of the investments in their inherited IRA and could name their own beneficiary. But the RMD for each beneficiary would still be based on the oldest beneficiary, so would not change from the RMD if the trust remained as beneficiary.
Permalink Submitted by Julian Perez on Mon, 2017-08-07 16:14
It is an irrevocable trust.