Daughter isn’t married to children’s Dad
My daughter has 5 children, but not married to her man. I have her listed as 100% Bene of my IRAs in my Trust. My goal is to make sure that HE doesn’t get any entitlement whatsoever-EVER Here’s my question.
I list my daughter as Bene and do per stirpes for the children. The problem I see is if my daughter receives my IRA and opens an Inherited IRA in her name, then SHE can list any Bene she wants (including her man). How can I control this?
Can I instruct the trust to hold my daughter’s Inherited IRA and ONLY distribute her minimum distribution each year, with instructions that at her death the children get the IRA
Permalink Submitted by Alan - IRA critic on Thu, 2018-05-24 17:20
Your basic concern applies whether they are married or not. Do you have a trustee of the trust in mind that would be provided with discretion regarding IRA distributions? That would allow the trustee to determine if your daughter needed the funds for current needs of her or the children as opposed to helping her partner pay of debts etc. The RMD based on the age of the oldest child plus any additional needed distributions would be distributed from the IRA through the trust and she would pay tax on her own individual rate. Conversely, if RMDs are not distributed from the trust, taxes would be due at the much higher compressed rates that apply to trusts. While you can draft the trust provisions to be highly restrictive and not provide any discretion for the trustee, that would also limit your daughter’s access to funds if she needed them personally or for the children.
Permalink Submitted by Donna Messinger on Thu, 2018-05-24 19:31
They are not married, probably won’t get married, but I’m NOT taking a chance. I am changing my trust to have a “fiduciary services” be the trustee, Now I get messed up beyond here Alan. The Trust is a look through, which allows the Custodian to transfer my IRA into an Inherited IRA in my daughters name. I then want that Inherited IRA to be in MY trust to control distributions. How would that get titled to make sure distributions are taxed at HER rate and not the Trust tax rate? I know she needs to take minimum distriutions, but that is all I want her to take. Other than required minimum distributions, I would give the trustee discretion. Can I then designate upon her death, the Inherited IRA gets passed to my grandchildren. I guess my fear is that once she gets the Inherited IRA she can designate anyone she wants as Bene, or can I control that? Sorry to make this so complicated. You are the best when it comes to IRA topics, been following you for years.
Permalink Submitted by Bruce Steiner on Sun, 2018-05-27 01:17
Permalink Submitted by Donna Messinger on Mon, 2018-05-28 16:49
OK, got it covered. I do; however have a question about the “deadline to open the Inherited IRA”. I’ve read Sept 30th following year of death in this articlehttps://www.marketwatch.com/story/did-you-inherit-an-ira-from-someone-who-died-last-year-2016-08-29and I’ve read (in one of your own staff articles)https://irahelp.com/slottreport/rmds-trust-beneficiary-irathat it was October 31st. Can you please clarify which date it is
Permalink Submitted by Alan - IRA critic on Mon, 2018-05-28 18:27
These dates address different issues. The 9/30 deadline is called the beneficiary finalization date meaning any beneficiary named by the decedent is not included in determining the RMD amount if they have been paid off or disclaimed their interest, although the disclaiming deadline is 9 months following the date of death. On the other hand 10/31 is the deadline for the trustee of a trust beneficiary to provide information regarding the trust to the IRA custodian. If this date is missed, a trust beneficiary is not qualified for look through treatment and the trust is treated as a non individual beneficiary which eliminates most of the stretch. An inherited IRA can be opened anytime. Another key date is 12/31 of the year following the date of death. That is the separate account deadline when there are more than one beneficiary. Any beneficiary that creates a separate account by that date can use their own life expectancy for RMDs rather than having to use the age of the oldest beneficiary.