IRA Beneficiary and Contingent both passed away
Last question of the weekend, promise.
If a trust is used as a beneficiary, and the life expectancy of the oldest beneficiary of the trust is considered for RMD purposes, what happens with the oldest beneficiary of the trust dies? Does the RMD now get calculated at the age of the now much younger remainder beneficiary?
The parties involved are the 1.) the primary IRA account holder, 2.) the child of the account holder, and 3.) the grandchild of the account holder. Primary account holder has passed away (10 years ago), child has passed away this year (was age 55), and the grandchild (now age 30) is now the beneficiary under the trust document.
Will the RMD to the trust be calculated now using the 30 year old’s life expectancy, or is it still based on the 55 year old’s schedule?
Thank you in advance and great forum!
PR
Permalink Submitted by Alan Spross on Sun, 2010-12-12 18:14
When you indicate “contingent” beneficiary, you probably mean the grandchild was the successor beneficiary under the trust agreement instead. A contingent beneficiary’s interest ceases if the primary beneficiary does not pre decease the owner, but if the trust provided that the grandchild was to receive the remaining funds after the death of the child, the grandchild will receive that interest, but the RMD will not change from that of the child. In other words, there would be no new stretch based on the grandchild’s age, and the RMD schedule of the 55 year old must be continued.
And all of this assumes that the trust was qualified for look through treatment at the time of the owner’s death.