See-through trust bene dies – options?

Submitted by Robert Vashko on Wed, 2019-10-09 18:59

Grandma dies, leaving IRA to see-through/qualified trust. Daughter is sole bene of trust, and trust properly commences stretch based on Daughter’s Table I life expectancy. No issues.

Daughter dies early with a sizeable balance remaining in the bene IRA. There is a Granddaughter in play who wants to maintain her mom’s (Daughter’s) remaining stretch schedule.

Setting aside any limiting language in the trust, can this bene account be passed to Granddaughter directly? *MUST* it be passed directly to Grabddaughter as bene of Daughter’s estate?

Or must it remain owned by the trust to maintain the stretch?



Submitted by Alan - IRA critic on Wed, 2019-10-09 19:24

If the trust provisions allow the trustee to terminate the trust, the trustee should be able to assign the inherited IRA to the GD if she was the successor beneficiary in the trust. GD must then continue the prior RMD divisor schedule and can name her own beneficiary.

Submitted by Robert Vashko on Wed, 2019-10-09 21:01

Thanks.  Suppose GD was not successor bene of trust, but was sole bene of Daughter’s estate.  I feel that may be too attenuated to allow the account to pass to GD and let the stretch continue. 

Submitted by Alan - IRA critic on Thu, 2019-10-10 01:59

Correct.  Hard to believe the trust provisions do not include a remainder or successor beneficiary. 

Submitted by Robert Vashko on Thu, 2019-10-10 13:59

Is there a IRS Q&A on this point – allowing account to pass to residuary beneficiary upon trust dissolution, and allowing that person to continue existing stretch?  I don’t recall anything addressing this topic in 590B. 

Submitted by Alan - IRA critic on Thu, 2019-10-10 14:44

590B does not address such technical issues with trust beneficiaries. I assume you are referring to the residual beneficiary in a will when the trust is not specific. Or possibly state intestate provisions or state level trust law would be a factor. You might check with the attorney who drafted the trust or another trust attorney in your state.

Submitted by Bruce Steiner on Fri, 2019-10-11 20:04

Submitted by Robert Vashko on Tue, 2019-10-15 20:29

In my case, Grandma left IRA to see-through trust. RMDs properly paid to trust based on Daughter’s life expectancy.  If Daughter died with a remaining balance in trust (she did), and Granddaughter was over age 25 (she is), trust terminates and passes assets to Granddaughter.I feel like the trustee, as part of wrapping up the trust, should be able to transfer the bene IRA to Granddaughter, who can continue stretching based on her mom’s RMD schedule, but can’t find a good Q&A in the CFR to substantiate.Best I could find is 1.401(a)(9)-5(c)(ii) – https://www.govinfo.gov/content/pkg/CFR-2006-title26-vol5/pdf/CFR-2006-title26-vol5-sec1-401a9-5.pdf Was hoping somebody knew of something better to cite. I also don’t know why my paragraph breaks aren’t showing up when I post.  Sorry for the wall of text.

Submitted by Alan - IRA critic on Wed, 2019-10-16 04:10

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