does a new Bene IRA or Bene Roth IRA have to be established outside the trust?

Submitted by Amanda Minter on Thu, 2020-10-22 19:35

We have a client who just turned 30 . This means she (and 4 other grandchildren) receive inheritance from her grandfather that was left in trust at age 30. Accounts include TOD, IRA and Roth IRA.
The current Account representative is telling the granddaughter that she has to cash out the bene IRA that’s in the trust, in order to move it to a bene IRA outside the trust , to another advisor. And it sounds like someone authorized putting all the IRA money into 1 account, all the NQ money into one account, Roth, etc… Last, trustee is not answering questions or taking phone calls from beneficiaries as named in the will.
any suggestions?



Submitted by Alan - IRA critic on Thu, 2020-10-22 20:30

Sounds like total mismanagement of this trust is at hand.  Typically, if the trustor specifies an age at which control is granted to beneficiaries, it means access to funds, not necessarily a distribution. That said, the trustee of the trust must adhere to the provisions stated in the trust, and in addition to tax law requirements with respect to RMDs for inherited TIRAs and inherited Roth IRAs. More basically, IRA types can never be combined within the same IRA account (if that is what you meant), but could be combined in the same trust. Any actual distribution of these inherited IRAs cannot be fixed by rollover, and distributions would be taxable with any remaining stretch period lost. RMD rules in the past may not have been observed by the trustee, but depend on whether the trust was qualified for look through purposes or not. For a trust to be qualified the trustee must have provided the trust info to the IRA custodians by 10/31 following the year of death. You did not indicate when GF passed. For “account representative” do you mean the trustee of the trust or someone hired by such trustee?

Submitted by Amanda Minter on Fri, 2020-10-23 14:38

so to clarify, not all ira money is combined but rather the TIRA money all in one acct, the Roth money all in one acct and the NQ money all in one acct.  with that said, the GF passed in 2018.  Account Rep is the current advisor.The 30 yr old granddaughter is attempting to get control of her portion of the inheritence and being told she must take a distribution, she can not move in kind.  we beleive the problem is there is only one TIRA acct, not 4.  there is one Roth acct, not 4, etc…  can she get her inheritence without actually taking a distribution?  can she transfer those accoutns outside of hte trust, to an advisor of her choice?

Submitted by Alan - IRA critic on Fri, 2020-10-23 15:19

  • The trust wording may be the source of the question, because trusts only refer to distributions to beneficiaries. However, such a distribution can normally be done as an in kind transfer and still be considered a distribution for trust administration purposes. Distribution FROM an IRA destroys any stretch remaining from the trust, so the trustee should not request or sign any “distribution” request FROM these IRAs. In other words, a transfer of client’s share to an inherited IRA of her own IS a distribution from the trust, but not from the IRA. Any advisor should be aware of this.
  • Once client’s share of the IRA is transferred to another custodian, client must understand what her annual RMD is starting in 2021. GF passed prior to the Secure Act, but if the trust was qualified by meeting all the IRS requirements (IRA custodian should know), client’s annual RMDs will be based on the oldest beneficiary of the trust because separate account RMD rules do not apply to trust beneficiaries. Therefore, client’s RMD divisor should generally be determined the same as it was while in the trust, based on the oldest beneficiary including any remainder beneficiaries who are not merely successor beneficiaries. This divisor should be 2.0 less than the divisor used for the 2019 trust RMD. 
  • If the trust was not qualified and GF passed after his RBD (4/1 of year after he would have reached 70.5), then the trust RMD is based on the remaining life expectancy of GF. If GF passed prior to his RBD, then the 5 year rule applies and all IRAs must be drained by end of 2024 (2020 does not count as one of the 5 years).

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