Inherited IRA – too late to convert?
New client. His sister passed away (before RBD) in 2007. She named her trust as beneficiary and he and his brother are beneficiaries of the trust.
His brother took the non IRA assets (less taxes for the IRA), he took the IRA.
Assuming it’s a “look through trust”, two issues:
1 – he’s not done anything yet and here it is Dec. of the year following the year of death. Can he convert it to an inherited IRA or has the ship sailed?
2 – Can he regardless given that his brother is 1/2 benefic. on trust?
Thoughts?
Permalink Submitted by mk foss on Mon, 2008-12-08 00:59
He will have to work with the IRA custodian on this one. If the trust says that it is to terminate upon death of grantor/trustor (the sister) and if it says that the trustee can do a nonprorata split of the trust assets, it’s possible that the custodian will allow all of the funds to be transferred to a beneficiary IRA for one of the two beneficiaries.
If the IRA custodian is not cooperative, it’s possible to have the IRA transferred to another custodian that would be more helpful – again assuming that the trust agreement allows what they want to happen. A RMD would need to be paid to the trust before a transfer could be made. That RMD and all subsequent RMDs would be based on the life expectancy of the oldest of the two beneficiaries even if one never receives benefits.
Good luck!