IRA Inheritance Trust…
I am familiar with the rules and regs governing IRA beneficiaires when using a Trust as beneficiary. My understanding is that if the trust qualifies as a look-through trust, then the beneficiaries of that trust (let’s say 3 adult children) can take lifetime RMD’s based on the age of the OLDEST beneficiary. However, I am seeing more ads by attorneys in my area advertising an “IRA Inheritance Trust” claiming that the individual trust beneficiaires can use their OWN life expectancies as opposed to using that of the oldest beneficiairy. Is there anything (other thana PLR) that references this possibility? I am assuming the name “IRA Inheritance Trust” is more of a marketing gimmick. Any clarification is appreciated.
Permalink Submitted by Bruce Steiner on Sun, 2010-02-28 02:10
I would agree with your description of this as a marketing gimmick. It shouldn’t make any difference whether the trust(s) that receive the IRA benefits are in the Will or in a separate trust instrument. Each child is usually a contingent beneficiary of the other children’s trusts (if a child were to die without leaving any issue and without exercising his/her power of appointment), so that the oldest child’s life expectancy would be used for the other children’s trusts.
Including the necessary provisions in the Wills shouldn’t significantly add to the fees for preparing the Wills.
For more on this, see my article on this subject in the March 2004 issue of BNA’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.