Inherited IRA Mess – URGENT
I have a client who is beneficiary of an estate via a trust. The deceased had a $1.3 million IRA with the estate(the trust) named as beneficiary. The deceased passed away in late January of 2009. The estate planning attorney has since cashed out the IRA and moved the funds to the trust bank account. He plans to distribute the funds to the beneficiaries (one of which is my client) per the trust stipulations. It appears after all of my research that any type of stretch has been negated and the only hope is that they are still within the 60 day window after a distribution to correct this. If I am missing something please let me know.
Permalink Submitted by Alan Spross on Thu, 2009-05-21 20:27
You are partially correct. The stretch is indeed gone for any non spouse beneficiaries of the trust, although there could be rollover options in certain cases for a spousal beneficiary. The 60 day rollover does not apply to any non spousal trust beneficiary. The estate attorney made a costly error here unless the provisions of the trust required this action, and if that was the case, then you would have to ask whoever drafted the trust why the provision existed. Trust beneficiaries are going to be faced with a huge tax bill on this lump sum distribution unless there are dozens of beneficiaries.
Is the estate planning attorney the successor trustee of the trust?
Permalink Submitted by Bruce Steiner on Sun, 2009-05-24 03:47
Depending on the terms of the trust, it may be possible to get the money to the spouse, who may be able to roll it over into his/her own IRA. See my article on this subject in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf
Given the amount involved, and what seems to have happened thus far, I suggest consulting with competent tax/estates counsel.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL