IRA Beneficiary After RBD- Administrative Trust
We had a client pass away that had a Living Trust as the beneficiary of his IRA. His wife predeceased him. According the the Administration Upon Death, the trust becomes an administrative trust. Per the terms of the Distribution of My Descendants, the Trust distributes 1/3 to each of the children outright and free of trust. What does that mean for the IRA? Do we need to open 3 individual beneficiary IRAs and they can distribute over 10 years or is the trust still the beneficiary? He also has approximately $10,000 of his RMD left to distribute.
Permalink Submitted by Alan - IRA critic on Tue, 2025-06-17 14:53
If the IRA custodian is cooperative, the trustee of the trust should be able to assign the IRA out of the trust to separate beneficiary IRAs for each trust beneficiary.
Assuming that the trust is qualified for look through, the 10 year rule will apply to these inherited IRAs, with annual RMDs due for years 1-9 based on the age of the oldest of the beneficiaries. In that case, the remaining 10k of the year of death RMD can be distributed in any combination between the 3 beneficiaries.
Should the IRA custodian not be cooperative, and the trustee of the trust cannot locate a different custodian to transfer the inherited IRA to that will accept assignment, it appears that the entire IRA will have to be distributed to the trust and passed through to the trust beneficiaries on a K 1. That would make the entire IRA taxable with no stretch at all.
This estate plan made no sense, and all beneficiaries would have been better off had the decedent named them directly on the IRA. The best hope now is that the IRA custodian will accept the assignment request from the trustee of the trust.
Permalink Submitted by Tracy Hawbaker on Tue, 2025-06-17 15:10
Agreed. The trust was set up with provisions to protect assets and provide financial support for the spouse who had dementia prior to her death about 3 months ago. The gentlemen then passed away suddenly about 2 weeks ago.