ira minimum distribution
A spouse died in October of 2009.
The assets are in her estate account -not yet poured over to the trust it is going to.
She would haave had to take a minimum IRA distribution for 2010.
Would it be adviseable to have the distribution going to the estate in the event that the trust is not set up by 12/31/2010 ?
Are there any other options ?
Permalink Submitted by mk foss on Mon, 2010-09-27 20:48
Who is the beneficiary of the IRA? If it’s the trust, the distribution could be the first asset transferred to the trust.
If there is no beneficiary listed, you need to see what the custodian’s agreement provides for in such a case.
A distribution will not go directly to a trust unless the trust is the named beneficiary.
If no distribution is taken in 2010, there is a potential 50% penalty on the missed distribution. In order to waive any penalties, the 2010 distribution plus the 2011 distribution will be due next year – when we expect that tax rates may be higher.
Permalink Submitted by Michael Solomon on Mon, 2010-09-27 21:31
I know all of this.
I am juust not sure if the beneficiary is the trust or the estate.
If it is the trust -and it is not formed by the endof the year -can it go into the estate?
Permalink Submitted by Alan Spross on Mon, 2010-09-27 22:15
If a trust beneficiary is to qualify for look through treatment, ie a qualified trust, then the trust documentation must be provided to the IRA custodian by 10/31/2010 in this case. That only leaves another month to get this done. Otherwise, they are stuck with a non individual beneficiary RMD treatment which would be the remaining non recalculated life expectancy of the deceased IRA owner. That is also the RMD treatment if the estate was the named or default IRA beneficiary.
If the surviving spouse had been named directly on the IRA, the survivor could have rolled over the IRA in 2010 and RMDs would be based on the surviving spouse’s life expectancy, and if she were not yet subject to RMDs, the 2010 RMD would be avoided entirely.
If the estate were named and the will is a pour over, I think that would supercede any chance of the surviving spouse doing a rollover because a pour over specifically sweeps the assets into a testamentary trust or another previously established trust.
Permalink Submitted by mk foss on Mon, 2010-09-27 22:16
The trust is “formed” as of the date of death (if testamentary) or as of the date of the agreement if it was a living trust. If the trust is the beneficiary, the RMD goes to the trust as beneficiary. Most institutions won’t accept a check or transfer to an account with another name.
I think you mean that the trust hasn’t been funded – perhaps they haven’t decided which assets will be transferred to it in what form. If that’s the case, they should just open an account in the name of the trust (it’s easy to get an EIN online) and transfer the other assets later.
A trust can’t be formed the year after a death.