Final Regulations Allow for Separate Accounting for Trusts
I live in Florida. My father who passed away 2 months ago has a Trust and I am the Trustee. His Trust was listed as a 100% Beneficiary on his IRA and there are 4 named Beneficiaries in the Beneficiary section of the Trust document. For 2 of those Beneficiaries his Estate lawyer created 2 Sub Trusts under the main Trust AFTER my father died because they are special situation Beneficiaries where the money needs to be managed by me, the Trustee. I am not sure why his lawyer didn’t do this before my father died and hopefully it doesn’t matter. Based upon the Trust documents and the paperwork which I have provided to the IRA custodian, Charles Schwab, they are setting up 3 Inherited IRA accounts, 1 account for my father’s main Trust and 2 accounts for the Sub Trust Beneficiaries. After his death my father’s lawyer obtained new Tax ID’s for all 3 accounts which I provided to Schwab along with the other paperwork. The Schwab Estate Specialist said that they will put the inherited money in the main Trust Inherited IRA account and as a Trustee I can transfer the funds to the 2 Sub Trust Inherited IRA accounts. For example, let’s say that the Trust is for John Smith and one of the special situation Beneficiaries name is Jane Doe. In her case I will be transferring money from the Schwab main Trust Inherited IRA for “The John Smith Trust” to the Schwab Sub Trust Inherited IRA for the “The Jane Doe Trust established by The John Smith Trust”. I will also be doing this for the 2nd Sub Trust special situation Beneficiary. Is the IRS usually notified of such a transfer to the Sub Trust Inherited IRA’s and will there be any tax implications? I just want to make sure that the money transferred to the 2 Sub Trust Inherited IRA’s doesn’t get inadvertently taxed all at once!
Permalink Submitted by Tom Craigers on Mon, 2024-11-25 11:26
“Hard to see whether this was set up according to the attorney recommendations or whether father made some of these decisions.”
My father made me a Co-Trustee 3 years ago when he reinstated the Trust. I was at the meeting with my father and his lawyer when he told my father to make the Trust a 100% Beneficiary which leads me to believe that he didn’t have a clue that 2 of the Beneficiaries, another one and me, who weren’t special situations, should have had our share go directly to us so that RMDS would have been 3 years longer since we are in our 60’s rather than being 89 years old turning 90 on 12/27/24. In the scheme of things I am not sure if it matters that much because since I am 68 years old and have to start doing RMDS for my own IRA in 2030 I will be in a lower tax bracket than if I was still pulling RMDS from my father’s Inherited IRA from 2031 thru 2035 along with my own IRA RMDS. Make sense?