Two Questions
More dead clients…
1) Can someone point me in the direction of where to locate the “rules” on a trust to stretch an IRA when the trust is the bene? I believe there are 5 or 6.
2) Client died with an annuity and the trust was the beneficiary. The trustee wants to cash out and we wanted to know if the tax will be due from the trust on the trusts return or can it be assigned to each of the beneficiaries of the trust?
Permalink Submitted by Aryn Sands on Wed, 2010-05-05 18:43
Nevermind on #1, I got the answer.
Permalink Submitted by Alan Spross on Wed, 2010-05-05 22:21
Q2 depends on the terms of the trust. If the trust does not require that funds be held in the trust, the distributions can be passed through to the beneficiaries on a K1 and they would report the income on their own 1040 forms and pay taxes at their individual marginal tax rates.
Permalink Submitted by Al Fry on Thu, 2010-05-06 17:06
If the annuity was non-qualified (not a QRP or an IRA or in an IRA), the trustee would have to take the death benefit in a lump sum (or over 5 years), as stretchouts are not allowed for NQ annuities payable to a nonindividual.
Permalink Submitted by Bruce Steiner on Thu, 2010-05-06 20:10
See my article on trusts as beneficiaries of retirement benefits, in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.