Disclaimer Trust as Beneficiary of IRA – Surviving Spouse as Sole Beneficiary – RMD calculation
Facts:
Husband died at age 69 (before beginning date) this year.
Wife (age 67) was named as primary beneficiary on IRA; disclaimer trust listed as contingent beneficiary.
Vast majority of husband’s assets were his IRA holdings.
For Oregon estate tax purposes, the attorney directed the surviving spouse to disclaim $1 million of the IRA account.
The disclaimer trust has language regarding distribution of RMD amounts directly to the beneficiary of the disclaimer trust (the surviving spouse).
Question: What is the correct method for calculating the RMD amount? Nothing for 2023. But what table and what method applies in this situation for future years?
Permalink Submitted by Alan - IRA critic on Fri, 2023-07-28 01:45
The disclaimer trust would probably be treated as a qualified conduit trust for the surviving spouse, with no RMDs required until the year the husband would have reached 73. In that year, the single life table would apply each year using the age of the surviving spouse for the divisor. The trust document must be submitted to the IRA custodian by 10/31/2024 for the trust to be treated as qualified for look through along with the other usual requirements. Even if the custodian agrees to make and report distributions directly to the surviving spouse (not made to the trust for distribution), I question whether the custodian will do that or what the consequences would be if they did. The disclaimer trust actually inherits the 1mm with a proper qualified disclaimer, and that determines the resulting RMD requirements.
Permalink Submitted by Craig Smith on Fri, 2023-07-28 15:19
Alan, thanks for the comment.Single life table follow up…Does that mean you only go to that table the first year? Your comment makes it sound like you could go back to the table every year, instead of just the first year. In my circumstances, she will be 70 in the year her deceased husband would have been 73. So her “life expectancy factor” will be 18.8 in that year. The second year is it 18.8 – 1 = 17.8, or back to the table for a value of 18.0?
Permalink Submitted by Alan - IRA critic on Fri, 2023-07-28 15:34
A sole spousal beneficiary is allowed to “recalculate”, which means accessing the table each year. Therefore, the correct divisor for the second year is 18.0 etc. She is treated as a sole spousal beneficiary if she is the conduit beneficiary of a qualified trust. The trust must comply with all the requirements for qualification. If the trust were to fail qualification, the 5 year rule would apply.