Prior to the Secure Act, a see through trust allowed the stretch for all trust individual beneficiaries based upon the shortest life expectancy. What seems odd at this point is that all Eligible Designated Beneficiaries are entitled to the stretch if named individually and a trust is not involved. However, if a trust is involved, only chronically ill and disabled EBDs may utilize the stretch and then only if the trust is an Applicable Multi-Beneficiary Trust that either splits the IRA into separate accounts upon the grantor’s death or provides that such beneficiaries receive all distributions until their deaths.

In trying to decide how to structure a revocable trust, I would like to confirm the following:

1. If a discretionary revocable trust is designated as the beneficiary of an IRA and all beneficiaries of the trust are Designated Beneficiaries (no EBDs), then there should be no need to split the retirement account upon the grantor’s death. The 10-year rule would apply for all and the trustee could choose to pay the IRA withdrawals to one or more of the Designated Beneficiaries in unequal amounts to facilitate the exercise of discretion.

2. If the Trust does not split and assets are to be divided, a chronically ill or disabled beneficiary would be subject to the 10-year rule like other Designated Beneficiaries even though they are EBDs.

3. In the context of a trust, the SECURE Act only specifically addresses two of the types of EBDs that may use the stretch – chronically ill and disabled. What does not seem clear is whether the trust’s instruction for a post-death split will enable the other types of Eligible Designated Beneficiaries (wife, person close in age to grantor, and minor child) to take advantage of his or her stretch opportunity if the account is split or would they be subject to the 10-year rule. By carving out only the chronically ill and disabled, the implication would seem to be that the 10-year rule applies.

4. If a grantor does not want to split the account for ease of administration and expense but is concerned that a Designated Beneficiary might become an Eligible Designated Beneficiary prior to the grantor’s death (especially a chronically ill or disabled person), could the trust be structured to split the account but only if one the Designated Beneficiaries is chronically ill or disabled at the time of the grantor’s death.