Inherited IRA beneficiary
Facts:
A Special Needs Trust (SNT) was set up for SON. FATHER dies and leaves half of his 401K to SON’S SNT. SNT names SISTER as beneficiary of TRUST. SON dies. Schwab says the distribution of the Inherited IRA from the SNT to SISTER must be distributed now and is fully taxable. No beneficiary was set up directly on the Inherited IRA. Has anyone had a situation similar to this?
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2020-02-03 17:59
What is Schwab’s role here other than being the inherited IRA custodian? Does the SNT terminate at the death of the disabled beneficiary? While son was living were RMDs based on the son’s single life expectancy?
Permalink Submitted by marc rubin on Mon, 2020-02-03 20:49
Schwab as the custodian takes avery conservative position and says unless proven otherwise, this is the way they are handing it. Yes, Trust terminates at time of death. Yes, RMD’s were being made on Son’s single life expectancy.Thanks!
Permalink Submitted by Alan - IRA critic on Mon, 2020-02-03 23:54
Have they been directly requested by the trustee to accept assignment of the inherited IRA to the successor beneficiary of the trust? They should be able to do that, since that beneficiary is able to complete the RMD schedule that applied to the trust, ie the remaining LE of the disabled beneficiary.
Permalink Submitted by marc rubin on Tue, 2020-02-04 16:10
So you are saying to just direct Scwab to assign the IRA to the benifiary and they will assume the Trust’s RMD schedule. Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2020-02-04 16:34
The SNT trustee should send Schwab a written request to assign the inherited IRA to the remaining beneficiary. That should require a formal response if they will not accept the request. At that point the issue should be elevated to a senior staffer to explain why they will not accept assignment. If they DO accept it they would then allow the successor beneficiary to continue the RMD schedule of the deceased SNT beneficiary. In other words, the IRA is to be distributed from the trust but the IRA balance is NOT to be distributed from the IRA. The use of “distribution” terminology when it means different things is confusing and can result in communication issues.
Permalink Submitted by marc rubin on Tue, 2020-02-04 17:30
Thank you for your repsonse! I will write Schwab,