grandfather named a conduit trust as beneficiary on non-qual annuity, Roth IRA and a Reg IRA, he passed January 2019
There are six equal beneficiaries of the trust, three children in their 60s (only one of whom had children) and grand children in mid 20s and 30. The trust document directs that six beneficiaries will receive 6 percent per year from the trust assets valued over 2 million. Thee are two trustees one of the children and one of his three children (i.e. grandchild).There are some relationship difficulties among the children of the deceased, making the situation very difficult. The trust is in a very flexible “decant” state. Is the five year rule the only choice or can the children establish their own IRAs maintaining the same nameplate? The decanting capability has led to discussion of changing to a more accommodating new trust and starting the entire distribution process to the benes. The annuity reaches 5 years early in 2023. Any thoughts would be helpful.
Permalink Submitted by Bruce Steiner on Sun, 2022-03-20 03:08
The general rule was that you could use the life expectancy of the oldest beneficiary.
The trustees might have been able to divide the trust by September 30, 2020, and decanted the resulting trusts to eliminate unwanted beneficiaries.
Since what you describe is so unusual, I would suggest consulting with competent trusts and estates counsel to determine exactly what you have.
While it may not increase the stretch, it should be possible to divide the trust.
I would then yell and scream at the lawyer who designed this plan, and possibly at the lawyer who handled the estate administration.
There’s often no good solution to investment-type annuities. If the trustees cash it in, they’ll bunch the income. If they keep it, they’ll continue to incur the costs, and the future income and gains will be ordinary income.
Bruce Steiner