RMD Factor for EDB via Conduit Trust?

Submitted by Susan Renaud on Tue, 2024-01-23 19:10

I’d appreciate your help with this situation. Client died in 2021, age 90; his wife who survives him still, was age 87 at his death. She is the sole beneficiary of a conduit trust; his children from a prior marriage are remainder beneficiaries. Client had both a Traditional IRA and a Roth IRA naming the trust as beneficiary. RMD in year of death was taken and paid through the trust to the SS. The issue is the RMD in subsequent years. Initial guidance we received was to use the Lifetime table as if the SS had been named as beneficiary and claimed it as her own – therefore the Uniform Lifetime Table, with the factor adjusting each year with her age – so 13.7 in 2022; 12.9 in 2023, etc. One of the remainder beneficiaries is monitoring the transactions in the account and challenging the factor used. He believes the factor should be 13.7 (for age 88 in 2022) minus 1 for each subsequent year. My own research on the subject has only muddied the waters – should we actually be using the Single Life Table instead? If so, should the factor by adjusted by age or be based on age 88 minus 1 each year. Any clarification you can provide would be very helpful.
Thank you!
Susan



Submitted by Alan - IRA critic on Tue, 2024-01-23 20:17

  • The SS trust beneficiary cannot be treated as the owner, therefore the Uniform Table does not apply. The 2022 beneficiary RMD single life table divisor was 6.6, but a conduit trust sole beneficiary can recalcute each year. Therefore the 2022 divisor was 6.6, 2023 divisor 6.1, then 5.7 for 2024 etc..
  • The above assumes that the trust was qualified for look through.


Submitted by Susan Renaud on Fri, 2024-02-09 21:47

So, same client – SS is trust beneficiary; qualifying conduit trust; Trad’l and Roth IRAs named trust as beneficiary. The wrong factors were used on both resulting in the wrong (lower) RMDs being paid.  Have read that penalties on RMDs in 2022 and 2023 have been waived in most cases.  Now need clarification on the following:

  • Any need to pay out the remaining correct RMDs for 2022 and 2023 from Traditional IRA? 
  • How about the Roth? The catch up amount in both cases is significant.
  • Does it matter that the Trust beneficiary is the SS / EDB?
  • Also heard no ROTH RMDs required starting in 2024 – is this correct? Does it apply in all situations?

thanks for your help – again! much appreciated.Susan



Submitted by Alan - IRA critic on Sat, 2024-02-10 20:20

  • Since a sole SS conduit qualified trust beneficiary is treated as an EDB, and the IRS beneficiary waivers for 2021-2023 only apply to 10 year rule beneficiaries, the waiver does not apply in this situation.
  • The delinquent RMD amounts for the 2 years should be distributed and a 5329 for 2022 and 2023 should be filed by the trust requesting the penalty waiver for reasonable cause. This applies to both the TIRA and the Roth IRA, but the Roth distributions are likely tax free.
  • Yes, the 10 year rule is avoided, but annual RMDs are required. The surviving spouse cannot elect to assume ownership of the inherited Roth as long as the trust is the beneficial owner.
  • Regarding no Roth RMDs in 2024, that only newly applies to participants in a Roth 401k. Beneficiaries of all Roth type accounts are subject to the RMD requirements.


Submitted by Susan Renaud on Mon, 2024-02-12 16:57

Thanks for clarifying.



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