A minor grandchild inherits my IRA but Living Trust states they will get it at age 21, 25 and 30. Does the 10 year rule negate
Under the latest IRA rules, a beneficiary must withdraw the entire inherited amount and pay taxes on the same within 10 years of inheriting it.
Our living trust was drafted so that our four grandchildren who are currently under age 21 would receive their share of my IRA upon my death but the living trust creates four separate trusts and the successor trustee will not give them the entire amount until they reach certain ages (21, 25 and 30).
Under the 10 year rule, would that negate the trust and would the trustee have to give the entire amount to each of the beneficiaries regardless of their age at the 10 year mark after my death?
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-28 01:52
Not necessarily. While the inherited IRA must be fully distributed in 10 years, the provisions of the trust may allow the distributed IRA funds to be held in trust until the respective age limits are reached. The downside of that is the trust will have to report the income that cannot be passed through and taxes paid at the higher compressed trust rates. It’s another case where control comes at a tax cost particularly when aggravated by the Secure Act RMD changes.