Can Trustee as IRA Beneficiary distribute assets in the form of Inherited IRAs
A 60 something year old IRA account holder died in 2021 and named her trust as beneficiary of her Traditional and Roth IRA. The three heirs of the trust are her siblings also in their 60s who are to receive lump sum distributions of all trust assets. Can the trustee make the distributions in the form of inherited IRAs in stead of cash proceeds so each heir can decide on their 10 year distribution plan to manage taxes and investment strategy up until that point based upon their respective facts and circumstances?
Permalink Submitted by Alan - IRA critic on Sun, 2021-09-26 14:44
Yes, the IRS clearly allows the trustee to do this through various PLRs if the trust itself contains that authority. But some custodians will resist and not cooperate with the trustee’s request. This is more likely to happen with small IRA custodians and banks. In addition, the trustee must be sure that the trust is qualified for look through and supply the trust info to the IRA Custodian by the deadline of 10/31/2022. If the trust is not qualified, then the 5 year rule will apply instead of the 10 year rule.
Permalink Submitted by Bruce Steiner on Sun, 2021-09-26 19:29
Why would an IRA owner create a trust that ends at her death and leave her IRA to it instead of naming (on the beneficiary designation form) the beneficiaries of the trust as the beneficiaries of the IRA? It creates complexity with no purpose.
If the financial institution won’t cooperate, the trustee could move the inherited IRA to a friendlier one. Some may want a legal opinion in order to do this. As Alan points out, the larger mutual fund groups and brokerage houses should be familiar with this.
Bruce Steiner