IRA in a trust
Client’s brother had a Supplemental needs trust that held an IRA which was inherited from his mother. Appropriate RMDs were being made to the trust and distributions were made to him from the trust. Brother dies, trust calls for the trust assets to be distributed upon his death, my client being the sole beneficiary of the trust. The custodian is saying this is a taxable event to the trust. They won’t re-title the IRA as an inherited IRA under my client’s name. Does anyone know of a provision to allow a rollover to an inherited IRA?
Permalink Submitted by Alan - IRA critic on Fri, 2021-11-05 21:59
The trust provisions requiring distributions include in kind distribution of the inherited IRA by assignment from the trustee of the trust to your client. The IRS custodian probably knows this is allowed, but would rather not cooperate. Therefore, client’s options are to either convince the custodian to accept the assignment or to find another custodian that will cooperate and transfer the inherited IRA to that custodian. In the meantime, client should make it very clear to the IRA custodian that they are not to make any distributions to the trust as that would produce a lump sum taxable event for the trust, likely to be passed through to client.
You didn’t ask about RMDs if the inherited IRA can be continued, but that depends on detail such as when mother passed and if she was the owner and not a beneficiary herself, her age upon passing, and when the brother passed.