Naming a Trust as a Partial Beneficiary to an IRA
One of our clients had his attorney draft up a “see through” trust for his IRA. The client and attorney wants to name his son as a primary beneficiary for 1/3 of the IRA. He wants to name the “see through” trust as the primary beneficiary for the other 2/3 of the IRA. From my readings, it appears a “see through” trust has to be the sole beneficiary of the IRA and that the son would need to be included inside the “see through” trust as one of the named beneficiary of the trust along with the other trust beneficiaries. I am not sure if I am completely off base. Can anyone please advise me on this issue?
Permalink Submitted by mk foss on Thu, 2010-05-13 23:28
IRAs can be split among beneficiaries to determine the measuring life for RMDs. The beneficiary designation date is September 30 of the year after the death and the IRA split needs to occur before December 31 of that year. Once the IRA is split on a timely basis, the see-through trust will be the sole beneficiary.
Permalink Submitted by Alan Spross on Thu, 2010-05-13 23:58
One potential problem here is that if for any reason the see through trust fails any of the tests required, the separate account rules are also sacrificed for the designated beneficiary and the 1/3 owner would lose their stretch. Therefore the 1/3 beneficiary has a real need to monitor the procedings to be sure the trust remains qualified.